On January 14th, the single-day turnover on the Shanghai and Shenzhen stock exchanges exceeded 3.9 trillion yuan. Following approval from the China Securities Regulatory Commission (CSRC), the Shanghai, Shenzhen, and Beijing Stock Exchanges issued a notice adjusting the margin requirement for securities margin trading, increasing the minimum margin ratio for investors purchasing securities on margin from 80% to 100%. This adjustment applies solely to new margin contracts, while existing contracts and their extensions established before the implementation date will continue to be governed by the previous regulations. Kaiyuan Securities released a research report stating that, with CSRC approval, the three exchanges have notified the public of the increase in the minimum margin ratio for margin purchases from 80% to 100%. The firm maintains a positive outlook on the brokerage sector, highlighting an expectation gap concerning both the sustainability of brokerages' profit growth and the impact of capital-side constraints. The brokerage segment has shown significant lag in performance, yet Kaiyuan Securities continues to be optimistic about the sustained growth potential in the major wealth management, investment banking, and institutional business segments, driven by the migration of household deposits and the reconstruction of stock market mechanisms. Huatai Securities pointed out that the January 14th adjustment by the exchanges to raise the minimum margin requirement for financing trades from 80% to 100% clearly reflects regulators' counter-cyclical policy stance. Margin financing currently represents a significant source of incremental market funds, with both the outstanding margin balance and the proportion of margin trading consistently rising since the start of the year; raising the threshold aims to guide the market towards a moderate de-leveraging. Comparing this move to a similar adjustment in 2015, Huatai believes the current measure will help dampen short-term volatility, stabilize investor expectations, and steer the market towards a healthier, more sustainable medium-to-long-term trajectory. For the securities industry, while the growth rate of margin trading and short selling might slow in the short term, the overall business environment is expected to become more stable. The firm recommends focusing on investment opportunities in leading brokerages with stronger capital strength and superior risk control capabilities. Relevant Hong Kong-listed concept stocks for Chinese brokerages include: Huatai Securities (06886), GF Securities (01776), China Galaxy (06881), Guotai Haitong (02611), CICC (03908), CITIC SEC (06030), China Securities Co., Ltd. (06066), Orient Securities (03958), Everbright Securities (06178), Shenwan Hongyuan (06806), Central China Securities (01375), and Guolian Minsheng (01456), among others.
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