On Tuesday, Chinese-funded brokerage stocks strengthened across the board, with China Merchants Securities (06099) leading the rise, gaining over 5% to reach HKD 14.38. Other brokerages such as China International Capital Corporation (03908), Shenwan Hongyuan (06806), and China Galaxy Securities (06881) also recorded gains. This collective surge in Chinese brokerage stocks is mainly attributed to the People's Bank of China (PBOC) introducing a liquidity tool for the first time, providing 50 billion yuan in swap facilities. This tool offers brokerages and other financial institutions more liquidity and incremental capital for the markets, significantly boosting market confidence.
On Monday, the PBOC initiated the swap facility for securities, fund, and insurance companies with a first operation scale of 50 billion yuan, involving 20 institutions in the bidding process. The operation was conducted via an interest rate bidding system, with the highest bid at 50 basis points, the lowest at 10 basis points, and the winning bid at 20 basis points. Concurrently, China International Capital Corporation completed its first pledged repo transaction under the swap facility, using the 2024 first tranche swap facility PBOC bonds as collateral. This move indicates that financial institutions have gained more financial support in the capital market, enhancing market vitality.
Macroeconomic and Policy Support Backing Brokerage Stock Rebound
Currently, the Chinese government is actively advancing policies for stable macroeconomic growth, focusing on supporting the real estate market, promoting infrastructure construction, and stabilizing capital markets. Particularly against a backdrop of slowing economic growth and increasing global economic uncertainty, the government is continuously implementing new stimulus policies, including fiscal support and interest rate cuts, to ensure continued economic recovery. These measures not only drive economic growth expectations but also inject more confidence into the capital markets.
Meanwhile, individual investors are showing a high enthusiasm to enter the market, and the rate of capital inflow into the stock markets has accelerated, providing more upward momentum for brokerage stocks. As key participants in the capital markets, brokerages generally perform well amid improved investor sentiment and abundant market liquidity. The PBOC's swap facility also further reduces financing costs for financial institutions, increasing the efficiency of capital use by brokerages and other financial entities, thus stimulating their eagerness to increase equity asset holdings.
Brokerage Business Benefits from Policy and Tool Introduction
The rebound in the brokerage sector is not merely a recovery in market sentiment, but also driven by policy advantages. The introduction of the swap facility provides strong support for brokerages to increase their holdings of equity assets. Kaiyuan Securities analysis pointed out that the conditions of the swap facility exceeded expectations, not only benefiting the efficient use of brokerage funds but also enhancing their return rates in the capital market. Furthermore, as policies continue to advance, brokerage balance sheet stability will also improve, with limited impact on statement volatility from the use of new tools.
The business model of the brokerage industry is diverse, encompassing brokerage services, investment banking, asset management, and wealth management, among others. The swap facility and stable macroeconomic policies have not only boosted the business confidence of brokerages but also allowed them to play a greater role in increasing equity asset holdings. This brings more incremental funds to the capital market, effectively enhancing overall market activity.
Impact of Global Economic Situation
Globally, the economic situation remains complex. As Western countries gradually enter a "high-interest environment" with elevated rates, global capital flows are constrained. The Federal Reserve’s continued rate hikes have exerted pressure on the liquidity of global capital markets, resulting in increased capital outflow pressures in some emerging market countries. However, the PBOC's accommodative monetary policy has effectively alleviated such external pressures and enhanced the resilience of domestic financial markets.
Additionally, geopolitical tensions in the Middle East also impact global energy markets and economic stability. Although international oil prices have recently adjusted, geopolitical risks may still contribute to market uncertainty, thereby affecting the global economy and financial markets. These external factors further highlight the necessity and importance of China's implementation of stable economic policies and capital market stabilization.
As macroeconomic policies are gradually implemented, expectations for China's sustained economic recovery continue to strengthen. Policies stabilizing real estate, stimulating consumption, and promoting infrastructure construction have brought positive signals to the capital markets, especially benefiting the brokerage sector which will continue to enjoy policy support. The active participation of individual and institutional investors, coupled with a relaxed financial environment, is expected to bring more investment opportunities to brokerage stocks in the future.
The collective rise of Chinese-funded brokerage stocks reflects market expectations for policy dividends, while also demonstrating investor confidence in China's economic growth prospects. Under the current global economic turmoil, the stability of China's capital markets and the diversified development of brokerage businesses will become key attractions for investors. Looking ahead, with the implementation of more macroeconomic policies and the innovation of financial tools, the brokerage sector is poised to maintain an upward trend.
