New | China brokerages’ year of living dangerously, as falling commission fees replace government intervention as major headwind, says ratings agency

Chinese securities companies are to see reduced government intervention this year, as the extraordinary measures imposed by authorities in the wake of the dramatic market sell-off have been lifted.

However, these brokerages face a new threat in the form of commission fee liberalisation, which will stoke competition and drive down fees, in addition to changes brought on by other policy changes, Standard & Poor’s senior analysts said on Thursday.

China’s brokerages were prohibited from net selling after the stock rout ripped through mainland markets last summer, and they also were required to contribute heavily to a national fund to help shore up the markets.

The edict prohibiting net selling was scrapped by the end of last year, and industry sources said the bailout fund had suffered a loss of around 10 per cent as of April.

“We feel government intervention is eased this year, as authorities are turning more cautious in policy making and seem unlikely to introduce extraordinary policies,” said Qiang Liao, senior director with the ratings agency.