Zhongtai Securities Co. Ltd.

The stable outlook on Zhongtai Securities reflects our expectation that the company will maintain its market position, commensurate risk management, and conservative leverage over the next 24 months. The company should also have a moderately high likelihood of receiving support from the province of Shandong, if needed. Shandong's credit profile is stable, in our opinion. We could lower the ratings on Zhongtai Sec if our view of the company's SACP weakens by two notches, or if we assess that government support has weakened and the SACP is down by one notch. However, this is quite remote over the next 24 months. The SACP on Zhongtai Sec could deteriorate if: (1) the company (including its subsidiaries) aggressively takes on risks or

...Zhongtai Securities Co. Ltd. (Zhongtai Sec)'s concentrated business profile moderates its credit strength. This mainly reflects the company's mediocre market position and revenue concentration in Shandong province. The company has a business standing that is at the weaker end of the range for its Chinese securities peers. This limits upside from our assessment of its stand-alone credit profile (SACP) at '##+'. Zhongtai Sec is likely to sustain strong capitalization to buffer against asset quality headwinds over the next two years. We expect the company to maintain a risk-adjusted capital (RAC) ratio of above 10%. It will also likely have a sufficient capital buffer to absorb incremental credit risks from its legacy book and Chinese property sector strains. Moderately high likelihood of government support will likely remain. Zhongtai Sec will likely maintain its close link with the Shandong government over the next two years. Our view reflects the provincial government's ultimate control...

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