As turnover ratio and margin financing/stock lending balances are expected to have peaked off in China, analysts at CITIC research have downgraded the Chinese brokerage sector to Neutral.
Shao Ziqin and team at CITIC Research in their June 29, 2015 research note conservatively estimate leveraged trades account for 25% of total A-share transactions.
Deleveraging risks will manifest
Ziqin and colleagues note thanks to the crackdown on speculative margin financing, the A-share market in China has dropped 19% from its peak on June 12. They point out that the drop in A-share market dragged the SSE Composite / SZSE Component / ChiNext indices to fall 7.4%/8.24%/8.9% respectively on June 26.
The CITIC analysts argue that the latest move by the PBoC to trim...
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