China's top brokerages rally on changes to securities law

[SHANGHAI] China's listed brokerages rallied on the mainland after the legislature approved changes to the law that may make it easier for new firms to list.

Citic Securities Co surged 7.4 per cent as of the midday break in Shanghai to head for its highest close in eight months. CSC Financial Co and Huatai Securities Co climbed at least 4.4 per cent. The benchmark Shanghai Composite Index added 0.9 per cent.

China's top legislature approved revisions to the nation's Securities Law on Saturday that potentially opened the door to the country adopting registration-based IPOs. Lawmakers also raised the maximum fine for issuance fraud to 20 million yuan (S$3.91 million) from 600,000 yuan effective March 1.

Brokerages would maintain their fees if a registration system is adopted and the listing process would also become more efficient, China International Capital Corp analysts including Yao Zeyu wrote in a note dated Sunday.

The changes to the Securities Law will also benefit brokerages that have good compliance and risk management because they will be held responsible for information that is disclosed, CICC added.

Policy makers started looking into a plan to have market participants play a greater role in IPOs as early as six years ago in order to move away from the securities regulator acting as the gatekeeper for all offerings and their pricing. The proposal for registration-based listings was thrown off course by China's stock market rout in 2015.

Firms can register to list on the Star market in Shanghai, and the ChiNext board in Shenzhen will adopt that approach, the CSRC has said. Those changes have not been made to main boards.

BLOOMBERG