China to conduct stress test on securities brokers

Risk tolerance will be assessed in the event of stock declines and rising bond defaults.

SHANGHAI: China’s securities association will conduct an annual stress test on brokerages this year, official newspaper China Securities Journal said on Thursday, citing sources familiar with the matter.

The Securities Association of China will conduct the test to gauge the companies’ risk-bearing capacity under extreme circumstances such as stock and bond declines and rising bond defaults, among others, the newspaper said.

The move comes after China’s stock market lost momentum after a rally fuelled by a re-opening post-strict Covid curb, and as some investors do not expect a strong recovery following a modest growth target for 2023, dashing hopes for a big stimulus.

The firms have to submit the results of the stress test and related data before April 14, the paper said.