STOCK investors are piling into China’s brokerages, made cheap by the worst equity rout in a decade.

Six of the 10 best performers on the CSI 300 Index this year are securities firms. The top gainer, Founder Securities Co.’s four-day advance, handed investors US$2.5 billion in market value and left analysts bewildered. The rally has room to continue: a Bloomberg gauge of China-listed brokerages is trading at 1.3 times net asset value, off October’s 0.96 record low but far below its 10-year average of 2.9.

The sector, a key indicator of sentiment in one of the world’s biggest stock markets, is benefiting from speculation that authorities will do more to support growth.

There’s also optimism that the planned rollout of a new trading venue for high-tech stocks will help the mainland wrest initial public offerings from Hong Kong or New York.

“People believe policymakers will step up efforts in the new year to avoid the mess the stock market was in, so more policies can be expected to stimulate the market,” said Dai Ming, a Shanghai-based fund manager with Hengsheng Asset Management Co. “A better year for stocks will also mean stronger results for brokers.”

The surge is a reprieve after four straight years of declines for the sector. The Bloomberg gauge of brokerages has gained 12 percent in 2019 compared with 1.3 percent for the Shanghai Composite Index. Securities firms had taken a beating last year over concerns about their business outlook as stock volume dwindled.

The sector’s reliance on market sentiment is its biggest weakness. Li Bin, a Shanghai-based fund manager at Capital Corise Asset Management Co., said he’d need much more evidence of a rebound.

“I wouldn’t engage in trading of broker shares at this point. It won’t last long.” Li said. “A turnaround in their businesses will only happen if we see a bull market.” (SD-Agencies)