What does the statement from the Chairman of the Securities Regulatory Commission, "appropriate easing," mean for brokerages?

The Chairman of the China Securities Regulatory Commission (CSRC), Wu Qing, recently proposed "appropriate deregulation" for high-quality securities firms, further optimizing risk control indicators and moderately opening up capital space and leverage limits. This statement is seen by the market as an important signal of a shift towards a more positive policy environment for the securities industry.

On December 6, Wu Qing stated at the 8th Member Congress of the China Securities Association that each securities company should leverage its own resource endowment and play to its comparative advantages, shifting from price competition to value competition. Leading institutions should maintain a sense of urgency that time waits for no one, and that not advancing means retreating, setting benchmarks in market competitiveness, customer and investor services, and risk management. They should further enhance their awareness and capability for resource integration, effectively utilize mergers and acquisitions mechanisms and tools, achieve complementary advantages, and strive to form several leading institutions with significant international influence during the 14th Five-Year Plan period.

"It is important to emphasize that first-class investment banks are not exclusive to leading institutions; small and medium-sized institutions should also grasp their advantages and develop in a differentiated manner, concentrating resources in segmented fields, specialized customer groups, and key regions, and working diligently to create 'small but beautiful' boutique investment banks, specialized investment banks, and specialized service providers," Wu Qing said.

Wu Qing indicated that the CSRC will focus on strengthening classified regulation, supporting the strong while limiting the weak, appropriately deregulating high-quality institutions, further optimizing risk control indicators, moderately opening up capital space and leverage limits, and improving capital utilization efficiency. For small and medium-sized securities firms and foreign securities firms, the CSRC will explore differentiated regulation in areas such as classification evaluation and business access to promote specialized development. For a few problematic securities firms, strict regulation will be enforced according to the law, and violations will be punished severely according to the law.

Institutional analysis believes that this policy statement has clear signaling significance, and the securities industry is expected to enter a "policy easing period" centered on supporting the strong while limiting the weak after undergoing a period of strict regulatory reshaping. The optimization of capital leverage will directly open up the business development and long-term growth space for ROE of securities firms, constituting an important benefit for high-quality leading securities firms.

Kaiyuan Securities: Securities Firms Welcome "Policy Easing Period," Leverage Limit Increase Boosts ROE

According to the industry weekly report released by Kaiyuan Securities on December 7, analysts Gao Chao and Lu Kun pointed out that the CSRC chairman's statement is positive and "beyond expectations." They believe that after undergoing strict regulatory reshaping, the industry is expected to officially enter a "policy easing period."

The report from Kaiyuan Securities analyzes that the core points of the regulatory authorities are reflected in three aspects: leverage relaxation, encouragement of innovation, and support for mergers and acquisitions. In particular, regarding leverage, the deregulation for high-quality institutions and the optimization of risk control indicators will moderately open up capital space. Analysts believe that this change has clear signaling significance, and the subsequent increase in leverage limits will directly assist the industry in achieving new breakthroughs in ROE:

(1) Leverage relaxation: Appropriate "deregulation" for high-quality institutions, further optimizing risk control indicators, and moderately opening up capital space and leverage limits.

(2) Encouragement of innovation: On the basis of controllable risks, continuously innovate financial products, services, and organizational structures, actively research and steadily promote the application of financial technologies such as artificial intelligence, and facilitate the innovation pilot work mechanism in the securities industry

(3) Support mergers and acquisitions: Support leading institutions in effectively utilizing mergers and acquisitions tools to achieve complementary advantages, striving to form several institutions with significant international influence during the 14th Five-Year Plan period.

(4) Emphasize differentiated advantages for small and medium-sized institutions: Top investment banks are not the "exclusive" or "patent" of leading institutions. Small and medium-sized institutions should leverage their advantages and develop in a differentiated manner, concentrating resources and refining their efforts in niche areas, unique customer groups, and key regions, striving to create "small but beautiful" boutique investment banks, specialty investment banks, and specialized service providers.

Based on this logic, Kaiyuan Securities continues to be optimistic about the strategic layout opportunities in the brokerage sector and recommends focusing on three main lines: first, brokerages with advantages in overseas and institutional businesses, such as Huatai Securities, Guotai Junan, and China International Capital Corporation (CICC); second, Guangfa Securities, which has significant wealth management advantages; third, Guosen Securities, which benefits from specific regional policies (such as the Hainan cross-border asset management pilot).

Guotai Junan: Optimizing capital leverage is an objective need for specialized operations

Guotai Junan analysts Liu Xinqi and Wu Haodong pointed out in their research report on December 7 that optimizing capital leverage is not only a policy direction but also an objective need for the industry to move towards specialized operations.

The report highlights through data comparison that the leverage ratio of Chinese brokerages is significantly lower than that of domestic and international financial peers. As of the end of the first half of 2025, the average leverage ratio of listed brokerages is 3.3 times, and even leading institutions like Guotai Junan and CITIC Securities are only at 4.5 times and 4.3 times, respectively. In contrast, the leverage ratio of the domestic banking industry is 12.2 times, while international investment banks like Goldman Sachs and Morgan Stanley have leverage ratios of 14.4 times and 12.5 times, respectively.

Guotai Junan analysts believe that, in addition to differences in business models, regulatory constraints on risk control indicators and derivative businesses are the main reasons limiting the leverage increase of leading brokerages. Under the current framework, the theoretical leverage upper limit for brokerages is about 6 times.

The report further points out that the essence behind optimizing capital leverage is to shift the industry's operations from a scale-oriented approach to risk pricing, moving from a purely license-driven advantage to specialized operations. With the growth of margin trading, derivatives, and cross-border capital intermediary businesses, high-quality leading brokerages with stronger leverage capabilities are expected to fully benefit from the long-term growth potential of ROE brought about by policy optimization