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Fitch Predicts CN Brokers' Earnings Pressure to Persist into 2H24
Recommend 10 Positive 7 Negative 8 |
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Affected by China's economic slowdown, ongoing geopolitical tensions, and tightened regulatory measures leading to sluggish market sentiment, Fitch Ratings anticipated the earnings pressure on Chinese brokers in 1H24 to persist into 2H24. Nevertheless, financial reforms aimed at building a high-quality capital market will benefit the long-term business development of these brokers. In a challenging market environment, Fitch expected that brokers will maintain conservative leverage usage, and larger brokers will actively expand their asset management businesses to enhance business diversification and improve earnings quality. Although the proportion of asset management business remains low (accounting for only 7% of sector revenue), it contributes more to the revenue of the top ten leading brokers, reaching 13%. Fitch also estimated that the evolving regulatory environment and ongoing sector consolidation will promote further tiered sector development. Financial reforms aimed at promoting direct financing and strengthening capital market order may bring more business opportunities to brokers and improve their risk management infrastructure. Leading brokers are more likely to benefit from these trends. Fitch-rated Chinese brokers have benefited from varying degrees of special support. Given these brokers' critical role in promoting capital market reforms and supporting strategically important industries, Fitch expected their relationship with respective shareholders to remain unchanged in the medium term. AAStocks Financial News |
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