Huatai Securities Issuer Summary

Report date: 2026-05-21
Issuer: Huatai Securities Co., Ltd.
Coverage ticker / market identifier: HTSC / 6886.HK / 601688.SH
Sector: China securities / investment banking
Primary credit focus: Consolidated issuer credit of Huatai Securities Co., Ltd., Jiangsu provincial support expectations, market and liquidity risks typical of a securities company, and offshore MTN issuance structures such as Pioneer Reward

Note: HTSC is the market identifier used for coverage purposes in this report and is not the legal issuer identifier for any individual bond. For individual bonds, the issuer, guarantor, guarantee scope, ranking, governing law, cross default, change of control, tax and remittance restrictions should be checked separately.

1. Business Snapshot and Recent Developments

Huatai Securities Co., Ltd. (“Huatai Securities” or “HTSC”) is a major securities company originating in mainland China, with operations in wealth management, institutional services, investment management and international business. It operates under the HTSC name in Hong Kong, and its A shares are listed on the Shanghai Stock Exchange, its H shares on the Hong Kong Stock Exchange and its GDRs on the London Stock Exchange. The starting point for credit analysis is to treat the company not as a commercial bank but as a market-based financial issuer. Its earnings are linked to equities, bonds, derivatives, investment banking transactions, client trading, margin financing, asset management balances and overseas securities operations, while its balance sheet contains substantial financial assets, margin financing, repos, short-term funding, client deposits and onshore and offshore debt.

In one phrase, HTSC is a “major Chinese integrated securities company with Jiangsu provincial support expectations.” Its largest shareholder is Jiangsu Guoxin Investment Group Limited, which held 15.22% according to the first-quarter 2026 report. In addition, shareholders related to the Jiangsu Provincial Government SASAC, including Jiangsu Communications Holding, Govtor Capital, Jiangsu SOHO Holdings and Jiangsu SOHO International Group, appear among the major shareholders. This indicates that the company has stronger ties with the local government than an ordinary independent private-sector securities company. At the same time, the presence of Jiangsu provincial shareholders does not constitute an explicit government guarantee for all of HTSC’s debt. A rating agency’s incorporation of support expectations and a bondholder’s possession of a legal guarantee are separate matters. This distinction is important throughout this report.

In 2025, HTSC’s earnings base benefited from the market recovery. On a consolidated IFRS basis in the 2025 annual report, total revenue and other income were RMB47.220bn, profit before tax was RMB18.405bn, profit attributable to shareholders of the parent was RMB16.383bn, and weighted average ROE was 9.20%. Compared with profit attributable to shareholders of the parent of RMB15.351bn and ROE of 9.24% in 2024, the profit amount increased, but ROE was broadly flat. This means the analysis needs to consider earnings quality and risk volume together, rather than simply viewing the year as one of high growth. Total assets increased from RMB814.270bn at end-2024 to RMB1.077tn at end-2025, while the adjusted debt-to-assets ratio rose from 69.53% to 75.25%. This indicates expansion of the franchise and increased market activity, but also greater balance-sheet sensitivity typical of a securities company.

The first quarter of 2026 started strongly on an unaudited CAS basis. According to the First Quarterly Report of 2026 published on HKEX on 2026-04-29, operating revenue for January–March 2026 was RMB10.422bn, up 41.48% year on year, and profit attributable to shareholders of the parent was RMB4.800bn, up 31.79%. The company attributed the increase in operating revenue to higher revenue from wealth management, institutional services and international business, supported by market recovery and more active trading. At end-March 2026, total assets were RMB1.225tn and equity attributable to shareholders of the parent was RMB211.407bn, both expanding further from end-2025. Quarterly profits should not be mechanically annualised to fix a credit view, but at least the earnings improvement seen in 2025 did not stop at the beginning of 2026.

The current credit reading is as follows.

There are four misunderstandings to avoid when assessing HTSC’s credit. First, the strong growth in Q1 2026 should not be treated as a permanent normalised earnings level. Securities-company earnings can rise quickly during market recoveries and can weaken at similar speed. Second, Jiangsu provincial shareholders should not be conflated with an explicit government guarantee. Third, the issuer credit of HTSC itself should not be transferred unconditionally to the recourse of offshore SPV bonds such as those issued by Pioneer Reward Limited. Fourth, the wealth management customer base should not be treated as having the same stability as a bank deposit base. Client assets are a powerful franchise element, but they are influenced by markets and investor behaviour.

2. Industry Position and Franchise Strength

HTSC’s franchise ranks toward the upper tier among Chinese securities companies. This report does not recalculate precise industry rankings or company-wide market shares, but with total assets above RMB1tn, equity attributable to shareholders of the parent above RMB200bn, parent-company net capital around RMB100bn, international ratings, A/H/GDR listings, domestic and overseas business platforms, and customer access through its wealth management app, the company should be treated as a core issuer in China’s securities industry. Its support path differs from state-owned or policy-oriented securities companies such as CITIC Securities and CICC, but the Jiangsu provincial shareholder base and its market position as a major securities company place a higher credit floor than that of ordinary independent small and medium-sized securities firms.

Credit analysis of China’s securities industry needs to consider both the policy environment and the market cycle. The development of direct financing, capital market reform, and the scaling and specialisation of securities firms may be tailwinds for major securities companies. However, revenue depends on equity turnover, IPO and refinancing activity, bond issuance, margin financing, investor sentiment, proprietary valuation gains and losses, and regulatory changes. Even with policy support for capital markets, if market prices decline, trading turnover falls and issuance markets shut down, multiple business lines can weaken at the same time.

One of HTSC’s differentiating features is its wealth management and fintech base. The annual report shows that the company emphasises digital customer touchpoints such as “ZhangLe Fortune Path.” In 2025, the app’s average monthly active users were 9.0266 million, ranking second among securities-company apps. From a credit perspective, this is not merely an app user count. A deep digital customer interface allows the company to channel client trading, financial product sales, fund investment advisory, asset allocation, margin financing, pensions and wealth products. For a securities company, the frequency of customer contact and data are infrastructure linking fee income and balance-based revenue.

However, fintech and wealth management do not automatically stabilise credit quality. App users are not depositors; they are participants in securities markets. If markets fall, investors reduce risk assets and financial product sales slow, revenue can decline even from the same customer base.

Institutional services are also important. HTSC’s institutional services include investment banking, research and institutional sales, equity and bond investment, fixed-income products, OTC financial products and derivatives trading. This is central to its profile as an integrated securities company that captures client flows, and indicates the company’s market presence and product capabilities. At the same time, this segment is closely tied to proprietary positions, derivatives, market-making, counterparty credit, collateral and repos. As earnings increase, risk volume can also rise. Under market stress, P/L, collateral demand and funding terms can deteriorate simultaneously. When viewing HTSC’s franchise as a strength, it is also necessary to recognise that the same businesses are key channels of market-based risk.

Investment management includes asset management, private equity, alternative investments, commodities trading and arbitrage, and contributes to revenue diversification. However, unlisted investments and alternative investments involve valuation volatility, exit-market risk, liquidity risk and investee credit risk, and should not be viewed only as stable fee income.

International business is a distinctive feature of HTSC. Hong Kong and overseas operations through overseas subsidiaries broaden the company’s links to Chinese issuers, cross-border investors, foreign-currency bonds, offshore funding and global markets activities. International business revenue declined in 2025 due to the effect of a subsidiary disposal in the prior year, but still recorded profit before tax of RMB3.653bn. From a credit perspective, international business supports revenue diversification and offshore market access, while also introducing foreign-currency funding, cross-border fund flows, Hong Kong and overseas regulation, jurisdiction-specific conduct risk, sanctions and AML exposure, and customer-protection rules. The presence of international business supports issuer credit, but also makes structural analysis of offshore bonds more important.

Overall, HTSC has the ability to combine retail/wealth, institutional services, asset management and international business as an upper-tier issuer in China’s securities industry. This supports earnings opportunities, market access, ratings and customer confidence in normal conditions. However, this strength is not the low-volatility stability of a commercial bank’s deposit and settlement base. It is a dynamic strength based on the ability to manage large customer flows and risks in capital markets. The credit question is not only how much the company can earn in good markets, but also how far it can maintain regulatory capital, liquidity, customer confidence and funding access in weak markets.

3. Segment Assessment

When assessing HTSC’s segments, revenue scale, profitability, capital consumption and market sensitivity need to be separated. In the 2025 segment information, wealth management was the largest revenue and profit source, while international business and institutional services were also significant. Investment management was smaller in revenue scale but had a high profit margin, reflecting the nature of asset management, private equity and alternative investments. Revenue and profit in international business declined from the prior year, but this reflected the effect of a subsidiary disposal in the previous year and should not be interpreted mechanically as deterioration of the franchise.

The key data based on the business segment information in the 2025 annual report are as follows. The amounts in the table are converted into RMB million and show segment “revenue and other income” and “profit before tax.” The proportions are approximate, using the segment total as the denominator, and do not match total revenue after consolidation eliminations.

Wealth management is the core segment supporting HTSC’s credit profile. In 2025, revenue and other income in this segment were RMB23.970bn and profit before tax was RMB8.851bn, accounting for about 48% of profit before tax. The segment includes client transactions in equities, funds, bonds and futures, financial product sales, asset allocation services, margin financing, securities lending and financial product distribution. Based solely on profit scale, HTSC is not a pure proprietary trading securities company, but a company able to generate profits around client flows and asset allocation services. However, wealth management is strongly affected by market sentiment. If client trading declines, margin financing balances fall and fund sales slow, a major earnings pillar weakens.

Institutional services improved substantially in 2025. Revenue and other income were RMB10.102bn and profit before tax was RMB2.955bn, almost three times the prior-year profit before tax of RMB0.997bn. The segment includes investment banking, research and institutional sales, equity investment and trading, fixed-income products and trading, OTC financial products and derivatives. From a credit perspective, this is a positive indication that HTSC has large-client relationships and product-provision capabilities. At the same time, this segment is also the area with the most direct exposure to market risk, liquidity risk and counterparty risk. In periods of rising revenue, it is necessary to check the growth in positions, collateral, derivatives, repos and risk capital.

Investment management improved with high profitability in 2025. Revenue and other income were RMB3.830bn and profit before tax was RMB2.878bn, implying a segment margin of around 75%. As defined in the annual report, the segment includes asset management, private equity, alternative investments, and commodities trading and arbitrage. From a credit perspective, this segment can contribute to revenue stabilisation through fee-based and balance-based income. However, profits from PE, alternative investments and commodities arbitrage are affected by market valuation, exit conditions and liquidity. It would be risky to treat the high margin as low-risk revenue without qualification. Investment management is a strength, but under stress it can also generate valuation losses and redemption or liquidity pressure.

International business revenue and profit declined in 2025. Revenue and other income were RMB8.730bn and profit before tax was RMB3.653bn, down sharply from revenue of RMB14.969bn and profit before tax of RMB6.942bn in the prior year. The annual report points to the effect of a subsidiary disposal in the previous year as the reason for the decline in international business revenue. Therefore, it should not be concluded simply that the overseas franchise deteriorated. At the same time, international business is linked to Hong Kong and overseas subsidiaries, foreign-currency funding, offshore issuance and cross-border fund flows, increasing the importance of structural analysis for bond investors. Overseas revenue is a diversification factor, but also brings regulatory and market risk in overseas jurisdictions.

Across the segments, HTSC is diversified but not independent of markets. Diversification absorbs weakness in individual segments, but capital market stress can affect several areas simultaneously. The improvement in segment profit in 2025 is positive, but it is not a basis for treating the company like a stable utility-type credit.

4. Financial Profile and Analysis

HTSC’s financial analysis needs to consider 2025 profit growth, the strong earnings increase in Q1 2026, total-asset expansion, the rise in the adjusted debt ratio, regulatory net capital and liquidity indicators as one package. For securities companies, when profits grow, financial assets, margin financing, client deposits, repos, short-term funding and collateral needs also tend to increase. Therefore, credit quality should not be assessed from P/L alone; the balance sheet and risk capital behind the profits need to be reviewed at the same time.

The key financial and regulatory indicators are as follows. For 2023–2025, the table mainly uses key consolidated IFRS indicators from the audited annual reports. For Q1 2026, it uses operating revenue and parent-company risk-control indicators from the unaudited CAS quarterly report. Because accounting standards and scope differ, IFRS annual total revenue and other income and CAS quarterly operating revenue should not be compared mechanically as the same metric.

The 2025 P/L was credit-positive. Total revenue and other income rose only modestly from RMB46.338bn in the prior year to RMB47.220bn, but profit before tax increased from RMB15.352bn to RMB18.405bn. On the cost side, total expenses declined from RMB33.340bn to RMB32.172bn, improving the pre-tax profit margin. By segment, wealth management, institutional services and investment management grew both revenue and profit. This indicates that HTSC has a business base capable of translating market recovery into profit.

However, the improvement in 2025 profit alone does not prove a step-change strengthening in credit quality. Total assets increased by 32.31% in 2025, with expansion in FVTPL financial assets, margin financing, FVOCI debt instruments, client deposits and repo-related liabilities. For securities companies, asset growth increases earnings opportunities, but also increases price volatility, collateral needs, short-term funding, counterparty credit exposure and liquidity demand. Operating cash flow in 2025 was an outflow of RMB63.456bn, explained mainly by an increase in FVTPL financial assets. This does not immediately indicate credit deterioration, but it shows that HTSC’s cash flow differs from operating cash flow at a general corporate and can swing materially with financial assets and market activity.

Q1 2026 was strong in both revenue and profit. Operating revenue increased by 41.48% year on year, and profit attributable to shareholders of the parent increased by 31.79%. The company cited higher revenue from wealth management, institutional services and international business, as well as market recovery and more active trading. Net fee and commission income increased by 47.15% year on year, and fair value changes on financial instruments turned from a loss in the prior-year period into a gain. However, expenses and credit impairment also increased, so the high quarterly profitability should not be treated as normal full-year earnings without adjustment.

On the capital side, parent-company net capital and regulatory indicators are important credit supports. The parent-company regulatory indicators based on the annual report and Q1 report are as follows. These are China securities-company regulatory indicators for Huatai Securities on a parent-company basis, and their scope differs from consolidated IFRS P/L.

The company states that its key risk management indicators met regulatory requirements and that there were no breaches of warning thresholds or minimum requirements. This indicates that the company is not currently operating close to regulatory limits.

However, the content of the regulatory indicators is not uniformly improving. At end-March 2026, net capital/liabilities was 18.63%, down slightly from 18.97% at end-2025. Net assets/liabilities also declined from 34.28% to 31.38%. Meanwhile, non-equity securities and derivatives/net capital rose from 305.53% to 329.53%. This indicates that exposure to fixed-income products and non-equity derivatives increased relative to net capital. High risk coverage ratios and LCR are strong supports, but the direction of risk volume in proprietary and derivatives-related activities must be considered at the same time.

Looking at the asset mix, FVTPL financial assets and margin financing were large at end-2025. Margin account receivables increased to RMB186.015bn. This is an earnings opportunity, but in a market downturn it can become a source of pressure through declining collateral values, margin calls, credit losses and changes in client behaviour.

The financial conclusion is that HTSC has support as a major investment-grade securities company in terms of earnings, capital and regulatory liquidity, but balance-sheet expansion and market dependence since 2025 set a ceiling on the assessment. Earnings power is not weak. Regulatory capital also appears sufficient at present. However, given total-asset expansion, the rise in the adjusted debt ratio, large swings in operating cash flow and the increase in non-equity securities and derivatives/net capital, credit assessment needs to monitor risk volume and funding conditions continuously, not only P/L improvement.

5. Structural Considerations for Bondholders

For HTSC bondholders, the most important issue is to distinguish which legal entity is the issuer, which entity is the guarantor, and which assets and cash flows are legally reachable. As an issuer report, this analysis focuses mainly on the consolidated credit of Huatai Securities Co., Ltd. However, individual bond investments need to distinguish Huatai Securities parent bonds, subsidiary bonds, SPV bonds such as those of Pioneer Reward Limited, Huatai International-related issuers, MTN programmes and guarantee agreements. Even if bonds appear in the market under the same “Huatai” or “HTSC” umbrella, recourse may not be the same.

The main offshore MTN documents reviewed in this report are MTN programmes with Pioneer Reward Limited as issuer and Huatai Securities Co., Ltd. as unconditional and irrevocable guarantor. The HKEX announcement dated 2026-01-26 describes Pioneer Reward Limited’s US$10bn Guaranteed Medium Term Note Programme as unconditionally and irrevocably guaranteed by Huatai Securities Co., Ltd. The HKEX offering circular dated 2025-09-11 identifies Huatai Securities Co., Ltd. as guarantor of Pioneer Reward Limited’s US$3bn Guaranteed Medium Term Note Programme. This indicates that, for the Pioneer Reward programmes reviewed, the guarantee from the listed parent company Huatai Securities is central to the credit.

However, several caveats are important. First, the MTN programme rating and the rating of each tranche may not be the same. The offering circular states that each tranche may be rated or unrated, and that the tranche rating may not necessarily be the same as the programme rating. Second, even for a guaranteed programme, investors need to check each pricing supplement, final terms, tax gross-up, early redemption, cross default, negative pledge, change of control, governing law, jurisdiction, listing category and investor eligibility. Third, this report does not comprehensively cover all offering circulars for Huatai International Finance II, Huatai International Financial Holdings and other Huatai International-related issuing entities. Therefore, the guarantee structure confirmed in the Pioneer Reward materials should not be generalised to all Huatai-related bonds.

For bondholders, the structures should be separated as follows.

The purpose of this table is not to take a negative view of HTSC group credit, but to avoid misidentifying recourse. Even if Huatai Securities’ issuer credit is assessed as investment grade, investor protection for an individual bond depends on the issuing entity, guarantee, ranking, jurisdiction, collateral, tax, cross-border remittance and regulatory constraints. For Pioneer Reward guaranteed MTNs, the Huatai Securities guarantee is an important support. For other SPV or subsidiary bonds, whether the same guarantee exists must be checked.

The relationship with Jiangsu provincial shareholders is also an important structural issue. The first-quarter 2026 report states that Jiangsu Guoxin, Jiangsu Communications, Govtor Capital and Jiangsu SOHO Holdings are wholly owned by Jiangsu Provincial Government SASAC, and that Jiangsu SOHO Holdings controls Jiangsu SOHO International Group.

This approximation is based on the top-10 shareholder disclosure and does not fully represent the overall shareholder structure, voting rights, acting-in-concert arrangements or effective control. The presence of Jiangsu provincial shareholders supports expectations of support, regulatory and policy importance, and access to domestic funding, but it is not a legal guarantee of debt.

When assessing government linkage, Jiangsu SASAC-related shareholdings as shareholders, the likelihood of extraordinary support assessed by rating agencies, and explicit guarantees for individual debt should be separated. S&P’s GRE list indicates a very strong link with Jiangsu province and a moderately high likelihood of support, but this is different from legal recourse specified in a guarantee agreement.

The structural conclusion is that HTSC’s issuer credit is supported by Jiangsu provincial support expectations and its major securities-company franchise, but protection for individual bonds is not automatically the same. The main analytical subject of this report is the consolidated credit of Huatai Securities Co., Ltd. For Pioneer Reward guaranteed MTNs, the Huatai Securities guarantee is important. For other Huatai International-related bonds, SPV bonds, subordinated debt and domestic bonds, the issuing entity, guarantee, ranking and terms need to be checked separately.

6. Capital Structure, Liquidity and Funding

In assessing HTSC’s capital and liquidity, it is necessary to consider not only cash but also regulatory net capital, liquidity coverage, stable funding, short-term debt, repos, the collateral value of financial assets, and access to domestic and offshore bond markets. A securities company is not a bank that supports lending with deposits; it generates earnings by managing financial assets and market funding. Therefore, even when liquidity indicators are high in normal conditions, collateral values, haircuts, investor behaviour, counterparty behaviour and client flows can all change simultaneously under market stress.

At end-2025, total borrowings and debt financing were RMB302.374bn. Of this, funding due within one year was RMB202.178bn, or 66.86% of the total, while funding due after more than one year was RMB100.196bn, or 33.14%. The 1–2 year bucket was RMB31.707bn, the 2–5 year bucket RMB57.100bn, and the above-five-year bucket RMB11.389bn. This shows that, as a securities company, HTSC makes substantial use of short-term funding. Short-term funding supports business flexibility, but if investor sentiment or market liquidity deteriorates, rollover terms and cost are directly affected.

Funding sources are diversified. At end-2025, fixed-rate borrowings and debt financing were RMB301.293bn, including short-term borrowings of RMB21.648bn, long-term borrowings of RMB0.171bn, placings from other financial institutions of RMB36.053bn, fixed-rate income certificates of RMB32.686bn, corporate bonds of RMB158.393bn, subordinated bonds of RMB21.934bn and foreign bonds of RMB30.408bn. Access to domestic exchanges, the interbank market, market-based funding and offshore MTNs is a strength as a major securities company. However, these are not sticky liabilities like bank deposits; price and access change with market conditions.

Liquidity indicators are strong in the recent period. At end-March 2026, the parent-company LCR was 409.47% and NSFR was 152.57%. At end-2025, LCR was 190.37% and NSFR was 142.88%, so LCR improved sharply in Q1. The company states that its main risk management indicators met regulatory requirements and that there were no breaches of warning thresholds or minimum requirements. This indicates no clear short-term regulatory liquidity weakness. However, quarter-end LCR can be affected by temporary funding positions and market conditions, so whether the high level is maintained in subsequent quarters needs to be monitored.

Cash and cash equivalents were RMB60.601bn at end-2025. This is a liquidity buffer, but compared with total borrowings and debt financing of RMB302.374bn and funding due within one year of RMB202.178bn, the structure is not one in which cash alone can absorb all short-term funding. As a securities company, HTSC manages liquidity through a combination of cash, highly liquid financial assets, pledgeable assets, repo markets, unsecured bond markets, bank lines and intra-group fund transfers. Therefore, liquidity needs to be assessed by looking at asset liquidity, collateral headroom and market access together, rather than the cash balance alone.

The stress channel through financial assets and repos is also important. FVTPL financial assets, FVOCI debt instruments, derivatives, margin financing and financial assets sold under repurchase agreements are earnings opportunities, but they are sensitive to rising interest rates, credit spread widening, equity price declines, lower liquidity and higher collateral haircuts. The rise in non-equity securities and derivatives/net capital to 329.53% at end-March 2026 is a monitoring item.

Subordinated bonds and foreign bonds strengthen capital and long-term funding for the issuer, but for investors, ranking and terms need to be checked. Even if HTSC’s credit is strong, subordinated bonds and SPV bonds should not be treated as the same risk as senior parent-company bonds.

Overall, HTSC has issuance access as a major securities company, investment-grade ratings, regulatory liquidity and Jiangsu provincial support expectations, and it is not an issuer currently showing evident liquidity stress. However, a substantial portion of its funding is market-based, and the proportion due within one year is high. Monitoring should focus on continued domestic and offshore issuance, issuance costs, short-term funding, repos, collateral headroom, LCR, NSFR, net capital, proprietary and derivatives indicators, and foreign-bond maturities.

7. Rating Agency View

HTSC’s international ratings are an important element supporting its market access as an investment-grade issuer. The Pioneer Reward Limited US$3bn Guaranteed MTN Programme offering circular dated 2025-09-11 states that the programme has been assigned a Baa1 rating by Moody’s, and that Huatai Securities Co., Ltd. has a Baa1 stable corporate rating from Moody’s and a BBB+ stable long-term issuer rating from S&P. The same OC also states that ratings are not recommendations to buy or sell bonds, may be changed, suspended or withdrawn at any time, and that ratings for individual tranches may not necessarily be the same as the programme rating.

In S&P’s public GRE list, Huatai Securities Co. Ltd. is shown as BBB+/Stable/A-2, with an SACP of bbb, and as an NBFI related to Jiangsu province as of 2026-04-30. The support assessment components are limited importance to Jiangsu province, very strong link, moderately high likelihood of support, and a one-notch uplift from the SACP. This indicates that S&P incorporates the support relationship with Jiangsu province to some extent in HTSC’s rating. However, this report has not obtained the full text of S&P’s individual issuer rating report, detailed upgrade and downgrade triggers, or the full discussion of each risk factor. The GRE list is a useful official list, but it is not a substitute for the detailed report.

Three points should be taken from the ratings. First, HTSC is treated by international investors as an investment-grade Chinese securities issuer. Second, the rating incorporates not only standalone credit quality but also Jiangsu provincial support expectations. S&P’s SACP is bbb, while the issuer credit rating is BBB+ after reflecting support. Third, support expectations are not legal guarantees. Even if a rating agency assesses the possibility of local government support, that does not make the Jiangsu provincial government the guarantor of individual bonds.

For Moody’s, the Baa1 stable rating is confirmed in the OC, but the detailed report text has not been reviewed in this report. Moody’s detailed standalone assessment, government support notching, upgrade and downgrade triggers, and qualitative assessments of liquidity, capital and earnings should be checked before making an individual investment. Fitch issuer ratings, if any, and the latest detailed report for HTSC itself have not been confirmed in this work. Domestic Chinese rating-agency reports have also not been obtained.

The important point in using ratings is that ratings should not substitute for a conclusion. HTSC’s credit quality can be evaluated to some extent based on the franchise in wealth management, institutional services and international business, profits from 2025 to Q1 2026, parent-company net capital, LCR, NSFR, Jiangsu provincial shareholders and MTN market access. At the same time, the existence of ratings does not justify omitting proprietary risk, short-term funding, individual bond structure or the distinction from government guarantees.

The conclusion of this ratings section is that HTSC is supported as a Baa1/BBB+ investment-grade Chinese securities company, but part of the rating depends on Jiangsu provincial support expectations and detailed triggers remain unconfirmed. When monitoring possible rating outlook changes, earnings sustainability, net capital, risk coverage, LCR, NSFR, proprietary risk, short-term funding, Jiangsu provincial support expectations, major regulatory or conduct incidents and individual bond structures should be reviewed continuously.

8. Credit Positioning

HTSC is best positioned between a major Chinese securities company, a local-government-related financial issuer and a market-based financial group. Its support path differs from CITIC Securities and CICC, but Jiangsu provincial shareholders and S&P’s support assessment give it stronger support expectations than ordinary independent small and medium-sized securities companies. However, detailed support triggers are unconfirmed, and it does not have the deposit, lending and settlement base of a megabank.

Fundamentally, HTSC should be treated as an upper-tier issuer in China’s securities industry. Total assets above RMB1tn, equity attributable to shareholders of the parent above RMB200bn, parent-company net capital around RMB100bn, strong regulatory liquidity, investment-grade international ratings, Jiangsu provincial support expectations, and its wealth management and institutional services franchises are key supports.

At the same time, it is not appropriate to place HTSC in the same category as megabanks or explicitly government-guaranteed bonds. Total-asset expansion, margin financing, FVTPL financial assets, derivatives, repos, short-term funding, foreign bonds, client flows, asset management products and international business all respond to market stress.

This report does not conduct relative-value analysis using market spreads or CDS because it has not checked live bond prices, OAS, Z-spreads or same-tenor peer comparisons on Bloomberg or similar sources. For individual bond investments, the issuing entity, guarantee, tenor, currency, subordination, liquidity and market level need to be checked separately. The fundamental positioning is “a major investment-grade Chinese securities company with Jiangsu support expectations,” but investment decisions must always confirm “which Huatai bond” is being considered.

As a credit positioning matter, HTSC is not a weak credit to avoid, but neither is it a low-volatility utility-type or bank-type credit. Market access, profits, capital, liquidity and support expectations as a major securities company support its credit floor. At the same time, market-linked earnings, short-term funding, proprietary and derivatives risk, offshore structure, and the distinction between support expectations and legal guarantees set the ceiling.

9. Key Credit Strengths and Constraints

HTSC has four main credit strengths. First is its franchise as a major Chinese securities company, with wealth management, institutional services, investment management and international business. Second is the Jiangsu SASAC-related shareholder base led by Jiangsu Guoxin and the Jiangsu provincial support expectations incorporated by S&P. Third is regulatory capital and liquidity headroom, reflected in parent-company net capital of RMB103.411bn, a risk coverage ratio of 310.47%, LCR of 409.47% and NSFR of 152.57% at end-March 2026. Fourth is the international investment-grade ratings confirmed as Moody’s Baa1 stable and S&P BBB+ stable, and offshore market access including Pioneer Reward guaranteed MTNs.

The main constraints are also clear. First, earnings and the balance sheet are market-sensitive, and financial assets, margin financing, derivatives, repos, margin trading and asset management products can come under simultaneous pressure when market conditions deteriorate. Second, of the RMB302.374bn of borrowings and debt financing at end-2025, 66.86% was due within one year, creating dependence on short-term markets and repo rollover conditions. Third, non-equity securities and derivatives/net capital increased to 329.53% at end-March 2026, requiring monitoring of interest-rate, credit-spread and liquidity risks. Fourth, Jiangsu support expectations are not legal guarantees. Fifth, Pioneer Reward, Huatai Securities parent bonds, Huatai International-related bonds and domestic subordinated bonds differ in issuer, guarantee and ranking, so prospectus-level review of individual bonds is essential.

10. Downside Scenarios and Monitoring Triggers

The most realistic downside scenario is simultaneous stress in China’s equity and bond markets. If falling share prices, declining trading turnover, stagnation in IPOs and refinancing, credit spread widening, higher repo haircuts and weaker investor risk appetite coincide, HTSC’s main segments could weaken at the same time. In this case, not only P/L but also client assets, margin financing, financial product sales, FVTPL valuation, collateral posting and short-term funding conditions would move in a linked manner.

The second downside scenario is an expansion of proprietary, fixed-income and derivatives risk. If interest rates rise, credit spreads widen, liquidity declines and derivatives valuations move adversely, collateral requirements and higher haircuts may pressure liquidity before valuation losses fully appear in earnings. The third is deterioration in short-term funding and foreign-currency funding rollover. Since around two-thirds of borrowings and debt financing at end-2025 were due within one year, investor demand in domestic bonds, the interbank market, repos and foreign-currency MTNs is important.

The fourth downside scenario is a change in Jiangsu support expectations. A reduction in Jiangsu SASAC-related shareholdings, weaker policy importance, deterioration in local-government finances, or a change in S&P or other agencies’ support assessment could put downward pressure on the current support-inclusive assessment. The fifth is regulatory, conduct and reputational risk. Major penalties relating to client asset management, suitability, derivatives sales, AML, cyber issues or investment-banking sponsor responsibility could affect customer confidence, deal origination, funding and ratings. The sixth is a reassessment of offshore bond structural risk. If the guarantee scope, guarantor, remittance restrictions or subordination of individual SPV bonds comes into focus, pricing could diverge from parent-company credit.

Monitoring items include quarterly operating revenue, profit attributable to shareholders of the parent, segment profit, client assets, app usage, margin financing balances, margin account receivables, FVTPL financial assets, derivative assets and liabilities, repos, funding due within one year, foreign bonds, parent-company net capital, risk coverage ratio, capital leverage ratio, LCR, NSFR, non-equity securities and derivatives/net capital, ratings, Jiangsu SASAC-related shareholder stakes, regulatory penalties, and domestic and offshore issuance costs.

Before investing in any individual bond, the issuer, guarantor, guarantee scope, existence of parent guarantee, SPV domicile, governing law, cross default, change of control, negative pledge, collateral, subordination, calls, tax, foreign-exchange and remittance restrictions, investor eligibility and listing rules should be checked. This report organises issuer credit quality and does not substitute for prospectus review of individual bonds.

11. Credit View and Monitoring Focus

HTSC’s current credit quality can be assessed as an investment-grade market-based financial credit supported by Jiangsu provincial support expectations and its franchise as a major Chinese securities company. The baseline direction is stable, but the profit improvement from 2025 to Q1 2026 is both a positive sign of market recovery being captured and a factor associated with larger total assets, short-term funding, and proprietary and derivatives sensitivity. The probability of rapid short-term credit deterioration is not high, but if China capital market stress, worsening short-term funding conditions, proprietary losses, a change in Jiangsu support expectations and major regulatory or conduct incidents were to coincide, funding conditions and spreads could react before P/L does.

The credit is supported by the customer base centred on wealth management, institutional services and international business, 2025 profit attributable to shareholders of the parent of RMB16.383bn, parent-company net capital of RMB103.411bn at end-March 2026, a risk coverage ratio of 310.47%, LCR of 409.47%, NSFR of 152.57%, Moody’s Baa1 / S&P BBB+ international ratings, and Jiangsu provincial shareholders. These place HTSC above ordinary small and medium-sized securities companies and support domestic and offshore market access.

The main constraint, however, is the volatility inherent in a market-based financial institution. As the company itself explains, the strong earnings increase in Q1 2026 was supported by market recovery and more active trading. Total assets increased from RMB1.077tn at end-2025 to RMB1.225tn at end-March 2026, and the adjusted debt-to-assets ratio at end-2025 rose to 75.25%. Given the increase in non-equity securities and derivatives/net capital as well, the better the earnings environment, the more important it is to check the growth in risk volume and funding.

For bond investors, the practical approach is to assess HTSC as “a major Chinese securities credit with Jiangsu provincial support expectations” while distinguishing it from “government-guaranteed bonds” or “bank-type deposit credits.” The consolidated credit of Huatai Securities Co., Ltd. has a degree of investment-grade strength, but for Pioneer Reward, Huatai International-related issuers, domestic subordinated bonds and other SPV bonds, issuing entity, guarantee, ranking, governing law and remittance restrictions determine investor protection. Individual bond risk should not be determined from group credit alone.

A further improvement in the credit view would require profit to be sustained over multiple quarters, revenue support from wealth management and investment management, containment of proprietary and derivatives risk, maintenance of high LCR and NSFR, and stability in Jiangsu support expectations and international ratings. Conversely, if proprietary losses, a sharp decline in client assets, deterioration in short-term funding conditions, weaker regulatory indicators, rating outlook deterioration, a change in support assessment, and major regulatory incidents were to coincide, the current view would need to be revisited.

HTSC is not viewed as a weak credit to avoid. However, the source of its strength is its ability to earn through markets and support expectations, not low-volatility cash flows. It should be managed as a market-based financial risk distinct from banks, utilities and explicitly guaranteed quasi-sovereigns, and legal recourse must be checked for individual bonds.

12. Short Summary & Conclusion

Huatai Securities is a major Chinese securities company with wealth management, institutional services, investment management and international business, supported by Jiangsu provincial shareholders and investment-grade ratings. From 2025 to Q1 2026, profits and regulatory liquidity were strong, but the company remains a market-based financial credit with total-asset expansion, short-term market funding, and proprietary and derivatives sensitivity. Bond investors should not confuse Jiangsu support expectations with an explicit government guarantee, and for SPV bonds such as Pioneer Reward, the issuing entity, guarantee, ranking and governing law need to be checked individually.

13. Sources

Primary sources

• Huatai Securities Co., Ltd. 2025 Annual Report, published on HKEX on 2026-04-28. Used for FY2025 financials, segment reporting, ownership context, risk-control indicators, funding, liquidity and business discussion.
• Huatai Securities Co., Ltd. First Quarterly Report of 2026, published on HKEX on 2026-04-29. Used for Q1 2026 unaudited financials, parent net capital and risk-control indicators, and top shareholders.
• Pioneer Reward Limited Supplemental Offering Circular for US$10bn Guaranteed Medium Term Note Programme, published on HKEX on 2026-01-26. Used for the offshore MTN programme issuer and Huatai Securities guarantee structure.
• Pioneer Reward Limited Offering Circular for US$3bn Guaranteed Medium Term Note Programme, published on HKEX on 2025-09-11. Used for programme and guarantor ratings, guarantee language and programme structure.

Rating and support context

• S&P Global Ratings, China GRE Ratings List, published 2026-05-19, showing Huatai Securities Co. Ltd. as BBB+/Stable/A-2, SACP bbb, with Jiangsu province support context as of 2026-04-30.

Text extraction support

• FinancialReports.eu text extraction of Huatai Securities 2025 Annual Report was used only to navigate the official annual report text more efficiently. The official HKEX annual report remains the source of record.

Unconfirmed matters and additional checks

• Moody's detailed issuer report, S&P detailed issuer report and rating sensitivities were not obtained. OC rating disclosures and the S&P GRE list were used, but detailed support assumptions and rating triggers remain to be confirmed.
• Fitch issuer rating, if any, was not confirmed.
• Domestic Chinese rating reports, domestic bond maturity schedule, subordinated debt terms and individual offshore MTN pricing supplements were not comprehensively collected.
• Live bond prices, CDS, OAS, Z-spreads and peer relative-value data were not checked.
• Individual Huatai International-related issuance structures beyond the Pioneer Reward materials were not reviewed. Any investment in a specific note should confirm issuer, guarantor, guarantee scope, ranking, governing law, tax gross-up, cross default, change of control, call provisions and transfer restrictions.