Zhongtai Securities Co. Ltd.

The stable outlook on Zhongtai for the next two years reflects our expectation of a moderately high likelihood of support for the company from the Shandong provincial government, if needed. We also expect Zhongtai to maintain its market position and strong capitalization during the period. We could lower the ratings on Zhongtai if we revise downward our assessment of the company's stand-alone credit profile (SACP). This could happen if: The company's business strength deteriorates sustainably, such that it cannot sustain its market position with recurring revenues, or increases its share of revenue from market-sensitive sources; or Its RAC ratio falls below 10% on a sustained basis, possibly due to aggressive business or investment expansion without commensurate capital accumulation. We could

...Zhongtai Securities Co. Ltd. will likely maintain strong capitalization in the next two years. We believe the company's capital position will provide a good buffer against modest growth in risks or volatility during signs of a recovery in China's capital markets. We project Zhongtai's risk-adjusted capital (RAC) ratio at 10%-15% over the same period. Zhongtai's above-average risk appetite moderates its credit strength. We expect the company will continue to face heightened risk of performance volatility. This mainly stems from its higher appetite in directional (unhedged) equity investments, compared with peers, regardless of its recent initiatives in portfolio risk rebalancing. We continue to see a moderately high likelihood of support from Shandong. We believe the provincial government will maintain its ultimate control of and influence in Zhongtai. The government will likely remain committed to supporting Zhongtai in times of stress, including via capital injections....

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