Shares of Chinese brokerages are leading the rally on the mainland on optimism the industry will benefit from a flurry of measures unveiled by the regulator to reform the market.
After the China Securities Regulatory Commission rolled out rules on Friday making refinancing and spin-off listings easier for listed companies and expanded the scope of derivatives trading, analysts are expecting more in the coming year.
"The financial regulation has entered an easing cycle, as there are lots of polices that are good for the capital market reforms," said Ma Tingting, an analyst at Guosheng Securities. "The new rules on refinancing, expansion of the options market and reforms of the ChiNext market are all conducive to the development of the brokerage industry."
Chinese brokerages are generally seen as a leading barometer of sentiment on the broader market, with a rally often preceding those in other sectors and signalling overall improvement in sentiment.
Among the 10 best performers on the CSI 300 Index over the past week, four are securities firms.
CSC Financial, ranked 12th in terms of total assets, and Tianfeng Securities, 36th on the list, according to the Securities Association of China, are the biggest gainers on the gauge, each rising at least 22 per cent.
The Chinese flag flies outside the offices of the China Securities Regulatory Commission in Beijing. Photo: AFP via Getty Images alt=The Chinese flag flies outside the offices of the China Securities Regulatory Commission in Beijing. Photo: AFP via Getty Images
A measure of 23 mainland-listed brokerages jumped 3.2 per cent on Tuesday, the highest level in three months. That also helped the benchmark Shanghai Composite Index to rise above the 3,000-point level for the first time since October with a 1.3 per cent gain.
CSC Financial gained 1.3 per cent to 27.46 yuan in Shanghai and Tianfeng Securities rallied 2.6 per cent to 6.75 yuan on Tuesday.
"The spin-off listing rule will be positive for brokerages' businesses related to IPOs and restructured listings," said Liu Xinqi, an analyst at Guotai Junan Securities. "We expect relevant policies on wealth management to exceed expectations going forward."
Brokerages also got a lift after policymakers shifted the tone from deleveraging to stabilising the leverage ratio in the financial industry at the Central Economic Work Conference " the country's top economic planning meeting that wrapped up last week.
Stock trading, which is a major source of brokerages' revenue, has increased after the signing of the phase one US-China trade deal provided relief to the broader market, helping to lure more investors.
Guotai Junan recommends Huatai Securities, whose shares have underperformed peers because of the issuance of global depositary receipts in June, and industry leaders such as Citic Securities and Haitong Securities, as they stand to gain the most from the reforms.
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