China brokers lead biggest rally since 2015 amid state support

Shanghai

CHINESE brokerages led the biggest rally in three years after authorities announced measures to ease risks stemming from stock-backed loans.

Bloomberg Intelligence's gauge for China-listed brokerages surged 9.8 per cent in Shanghai on Monday, compared with 4 per cent for the main index. More than 30 securities firms listed in the city and Shenzhen hit the 10 per cent limit. Citic Securities Co, the nation's largest by market value, rallied the most since March 2016.

The rebound in China's brokerages, which rely heavily on investor sentiment for their revenue, follows President Xi Jinping's vow of "unwavering" support for non-state firms, commitment from the country's stock exchanges to help manage risks from loans that have shares as collateral, and the government's plan to cut personal income taxes.

"The collective message from top financial officials has, to some extent, eased concerns," said Chen Fu, an analyst at GF Securities Co. "The green signal given to private equity firms, insurance companies, and brokerages to funnel their money in has greatly assured investors."

On Friday, heads of the central bank and securities and banking regulators, as well as China's vice-premier Liu He, made statements urging and pledging increased support for private companies and the markets. Among other measures, they asked funds backed by local governments and firms such as insurers to help ease pressure on listed companies from share-pledge risks.

The moves by Chinese authorities will help reduce stock-pledge risks, stabilise the domestic equity market, and improve valuations for Chinese brokerages, analysts from Goldman Sachs Group Inc wrote in a note on Monday. BLOOMBERG