Big China Brokers Seek to Raise Capital as Default Risks Linger

Chinese brokerages are boosting capital to protect against a market plunge that threatens the value of $640 billion worth of shares pledged as collateral. Securities firms have extended more than a third of China’s stock-backed loans, which may go sour and force lenders to offload the shares, Bloomberg News reported. To cushion themselves, at least three of the country’s biggest brokerages have announced capital raising plans in recent months, joining the nation’s big banks in strengthening buffers. Questions surrounding the stability of brokerages has been a key concern for investors as China’s stock market has plunged 20 percent this year. The sector, which is a barometer of local investor sentiment, has suffered more than most, with Bloomberg Intelligence’s gauge for China-listed brokerages down 28 percent in 2018. Capital-raising efforts should help them deal with any uncertainties. Read more

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