Capital, liquidity to mitigate APAC brokers' earnings pressure

November 30, 2021 (MLN): Fitch ratings in its latest report issued today said that it has a neutral sector outlook for Asia-Pacific's (APAC) broker-dealer sector covering China, Japan and Taiwan.

According to the rating agency, this is underpinned by the expectation that adequate capital and liquidity buffers will mitigate pressure on profitability from a possible market downturn, and lower volumes caused by the withdrawal of pandemic-related government-support measures.

Fitch also expects greater franchise differentiation in a competitive environment, as a sharpened regulatory focus on risk and faster adoption of financial technology will benefit leading securities firms with strong balance sheets and more sophisticated risk infrastructure.

Fitch's rating outlooks for support-driven issuers in China and Japan remained stable, reflecting the expectation of strong extraordinary support by governments or shareholders if needed, and its view of the credit profiles of the sources of support being stable.

The report further noted that the outlooks for those rated on a standalone basis are also stable; this reflects the assessment that their credit profiles will remain steady, featuring modest leverage and adequate risk control in a strengthened operating environment.

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