Margin financing, a key source of funding in the A-share market, has drawn significant attention in recent years. With outstanding margin balances hovering near historic highs, investors are closely watching how much additional liquidity may enter the market.
Recently, two securities firms announced plans to raise the upper limits for their related businesses, sparking market interest.
On the evening of February 11, Caida Securities announced it intends to increase the authorized scale for its credit trading business. The limit will be raised from no more than 100% of its audited net capital ratio for 2024 to no more than 140%. Separately, Donghai Securities also recently announced that its board agreed to raise the total scale upper limit for its margin trading business from "no more than 10.2 billion yuan" to "no more than 11 billion yuan."
According to Caida Securities' 2024 annual report, its parent company’s net capital stood at 10.842 billion yuan at the end of 2024. After the increase, the funds allocated to its credit business would rise from 10.842 billion yuan to 15.178 billion yuan, an increase of 4.346 billion yuan.
Although it is not explicitly stated that all credit business will be used for margin trading, current conditions suggest that margin financing is the primary area for expansion within broker credit business and the segment with the strongest investor demand. Other categories, such as pledge-style repurchases, remain stable. Therefore, most of Caida Securities' increased credit business limit is likely to be directed toward margin financing.
Caida Securities noted that the proposal has received preliminary approval from the board's audit committee and still requires approval at a shareholders' meeting.
Donghai Securities’ increase in its margin financing business limit, though only 800 million yuan, also clearly signals an intention to boost investment in this area.
In recent years, securities firms have consistently increased their focus on margin financing. In 2025, multiple brokerages raised their margin trading limits. In September of that year, Zhejiang Securities and Hualin Securities announced increases in their credit business quotas. Among them, Zhejiang Securities stated it would raise the scale of its financing-related businesses from 40 billion yuan to 50 billion yuan, while Hualin Securities planned to adjust its total credit business limit (including margin trading) from 6.2 billion yuan in March to 8 billion yuan.
After the National Day holiday in 2025, China Merchants Securities announced plans to raise its margin trading business limit from 150 billion yuan to 250 billion yuan, and Huatai Securities planned to adjust its total margin trading scale to no more than three times its net capital for the same period.
These moves by brokerages to raise credit-related limits are not isolated events but are set against the backdrop of subtle shifts in the A-share market and the margin financing sector.
From a long-term perspective, the margin financing balance surged from 1.39 trillion yuan at the end of August 2024 to 2.72 trillion yuan by the end of January 2026, a cumulative increase of over 1.3 trillion yuan, making it one of the key drivers behind the current uptrend in A-shares. Against this backdrop, investor demand for margin financing remains strong, with earlier reports indicating that some small and mid-sized brokerages had exhausted their margin financing quotas.
However, in the short term, margin financing data—particularly financing balances—has shown a slight decline recently, influenced by both policy adjustments and market fluctuations.
Data from East Money Choice shows that as of February 11, the A-share financing balance stood at 2.6278 trillion yuan, down from 2.7222 trillion yuan on January 29, a decrease of nearly 100 billion yuan.
Trading activity in margin financing has also cooled. On February 11, margin trading accounted for 9.03% of A-share trading volume, whereas before the Shanghai, Shenzhen, and Beijing stock exchanges officially raised the minimum margin ratio from 80% to 100% on January 19, the proportion had exceeded 11%.
How should one interpret the current situation where margin trading activity has declined, yet brokerages are expanding their capacity against the trend?
In reality, the current state of margin trading aligns with the overall pattern of shrinking volume and sideways movement in the A-share market ahead of the Lunar New Year holiday—a scenario that has repeatedly occurred before previous long breaks.
According to observations from Caida Securities’ investment advisors, historical market performance shows that, in the absence of major market-wide catalysts, trading in the days leading up to a long holiday often features reduced volume and range-bound movement, and the current period is no exception.
Everbright Securities also noted that index fluctuations have intensified amid divergence, while trading volume in the Shanghai and Shenzhen markets has continued to shrink, falling below 2 trillion yuan. This reflects some investors choosing to take profits and hold cash ahead of the holiday. Although policymakers continue to express support for market stability, the preference for cash holdings has led to declining trading activity, keeping indices in a narrow, low-volume range. The Shanghai Composite Index may continue fluctuating around 4,100 points, suggesting a need to control position sizes, with significant market shifts likely waiting until after the holiday.
Overall, however, the market maintains a cautiously optimistic outlook for post-holiday performance.
Huaxi Securities pointed out that market liquidity typically improves significantly after the holiday as funds return. Looking ahead, short-term factors that have weighed on the market are expected to gradually ease. As liquidity conditions improve after the break and expectations for policy announcements during the National People's Congress intensify, market sentiment is likely to recover. Combined with the seasonal pattern of spring rallies, the market is expected to stabilize and stage a recovery after the holiday.
Dongguan Securities added that, from a medium- to long-term perspective, regulators have signaled intentions to standardize the market and prevent overheating risks. Fundamentals and corporate earnings may regain dominance, and market style could shift from earlier sector-led gains to a more balanced structure. In terms of allocation, dividend assets still hold long-term value as core holdings. Additionally, moderate attention may be paid to recovery opportunities in cyclical sectors and some traditional consumer segments where valuations remain low.
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