A Chinese brokerage firm that saw its share price rocket more than 80% in June warned investors of trading risks, adding there’s little change in the company’s business environment.
Everbright Securities Co. said in an exchange filing on Wednesday that traders should be “rational and prudent” as the valuation of its stock has risen above the industry’s average after the recent surge. The brokerage’s Shanghai-listed shares have risen in all but one day this month, hitting the 10% daily limit on several sessions, to lead gains on the benchmark CSI 300 Index.
Brokerage firms are getting a boost from an uptick in market sentiment as Chinese stocks extend their recent outperformance against global peers. The CSI 300 Index has bucked a global selloff to rise more than 4% this month, with trading turnover topping 1 trillion yuan ($149 billion) in succession.
Everbright Securities gained as much as 8.4% early Thursday despite the firm’s warning.
Financial firms typically rally when the stock market is running strong as trading activity picks up. A Bloomberg gauge of onshore broker shares surged to a two-month high on Wednesday, with volume reaching the highest level in almost two years.
But the rally has started to look excessive, as the 14-day relative strength index on the gauge indicates the shares are at overbought levels. The gauge slid as much as 1.4% on Thursday.
A number of Chinese brokerages, including Hongta Securities Co. and CSC Financial Co., also retreated after rallying up to the daily 10% limit earlier this week.
