Summary: Haitong Securities Co. Ltd. And Haitong International Securities Group Ltd.

Strong capitalization. Robust market position in China's retail brokerage segment. Conservative management. Groupwide risk management integration at the developing stage. Revenue concentrated in the stock brokerage business and from investment gains. The negative outlook on Haitong reflects our view that Chinese securities firms will continue to face heightened industry risk over the next 12-18 months, including ongoing regulatory measures that may potentially hit their business. We could lower the rating on Haitong if the company's SACP weakens by one notch. This could occur if: (1) ongoing regulatory measures negatively affect the business profiles of Chinese brokers, causing us to lower the anchor for securities firms in China to 'bb-' from 'bb'; or (2) Haitong's expected RAC ratio is below 10%,

...Outlook The negative outlook on Haitong reflects our view that Chinese securities firms will continue to face heightened industry risk over the next 12-18 months, including ongoing regulatory measures that may potentially hit their business. We could lower the rating on Haitong if the company's SACP weakens by one notch. This could occur if: (1) ongoing regulatory measures negatively affect the business profiles of Chinese brokers, causing us to lower the anchor for securities firms in China to '##-' from '##'; or (2) Haitong's expected RAC ratio is below 10%, which could occur if the company substantially increases its proprietary equity investments, or (3) the company has more credit losses than normalized losses, which stood at RMB1.3 billion at the end of 2015, or has substantially more market-related losses than its peers'. We may revise the outlook to stable if we do not foresee a lowering of the anchor for securities firms in China and expect Haitong to maintain its business and...

Summary