Shrinking margins ahead for brokerages

Surging share prices in the Chinese mainland are raising the prospect of government action to prevent an equity bubble, a potential threat to brokerage earnings that are projected to hit a seven-year high this year.

UBS Group AG has said that regulators could limit the use of credit in buying stocks. In 2007, authorities raised a trading tax after a sixfold increase in the Shanghai Composite Index over two years. Some brokers have boosted minimum-asset requirements for margin trading and short selling, the 21st Century Business Herald said on Wednesday, citing unidentified employees.

Potential government action puts at risk the trading volumes and record margin lending that have placed the nation's 19 publicly traded brokerages on course for a 62 percent profit gain this year, data compiled by Bloomberg show.