- Securities firms’ high exposure to the equity market is partially balanced out by the industry's low leverage.
- We believe Chinese securities firms are subject to prudent and rigorous regulation with supervisory requirements on their capital, risk and liquidity metrics, which is another contributing factor to the sector’s stability.
- Increased stock market activities have supported securities firms’ earnings in recent years. Brokers have also reduced their stock-pledged lending assets, reducing their credit risk exposure. These factors are positive for the sector’s credit outlook for the next 12 months.
- We believe Chinese securities firms show varying credit quality. Based on our testing results, the indicative stand-alone credit quality of securities firms ranges from [aspc+] to [bspc-], and indicative issuer credit quality ranges from [AAspc] to [Bspc-].
- We believe that the securities sector poses small systemic risk to the financial system. More than 90% of securities sector assets are with brokers with investment grade credit quality.
- We believe Chinese securities firms are subject to prudent and rigorous regulation with supervisory requirements on their capital, risk and liquidity metrics, which is another contributing factor to the sector’s stability.
- Increased stock market activities have supported securities firms’ earnings in recent years. Brokers have also reduced their stock-pledged lending assets, reducing their credit risk exposure. These factors are positive for the sector’s credit outlook for the next 12 months.
- We believe Chinese securities firms show varying credit quality. Based on our testing results, the indicative stand-alone credit quality of securities firms ranges from [aspc+] to [bspc-], and indicative issuer credit quality ranges from [AAspc] to [Bspc-].
- We believe that the securities sector poses small systemic risk to the financial system. More than 90% of securities sector assets are with brokers with investment grade credit quality.
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