(Bloomberg) -- Chinese brokerages surged after authorities proposed to relax capital requirements for firms and signaled support for more acquisitions.

Guolian Securities Co. soared by the 10% daily limit in Shanghai, leading gains among peers. Citic Securities Co., Shenwan Hongyuan Group Co. and Huatai Securities Co. also advanced. Meanwhile, China International Capital Corp. shares jumped 7.9% in Hong Kong.

Driving the rally was a broad proposal by the nation’s securities regulator to ease risk control for the sector, where it aims to lower the capital requirements for some assets to allow brokerages to deploy more capital. It also came after a report by a top state-run industry newspaper that cites regulatory backing for mergers and acquisitions by leading brokerages. 

“Large brokers will benefit most from capital requirement relaxation which will boost their leverage and return on equity,” Citigroup Inc. analysts including Judy Zhang wrote in a note. Their top picks for the sector are Huatai’s onshore shares and Citic’s H-shares.

Citi also expects more measures to be rolled out to attract insurers and pension funds to participate in the onshore market.

The latest signs of policy support followed steps taken by authorities in recent months to restore investor confidence, including slowing the pace of initial public offerings, curbing sales by some top shareholders, cutting the stamp duty on stock transactions and easing rules on margin trading.

State media China Securities Journal reported earlier that authorities were supportive of mergers and acquisitions of leading brokerages to create top-ranked investment banks. The move is in line with the government’s vow to improve the quality of listed companies at the Financial Work Conference last month. 

“Investors can keep a close eye on securities companies under the same shareholder,” Citic Securities analysts including Tian Liang wrote in a note. “They may accelerate the M&A process under the policy support.” 

Meanwhile, Guolian Securities and Founder Securities Co. also rallied following interest in the companies after earlier announcements of merger and acquisition deals. Guolian Securities said in a stock exchange filing in March that its controlling shareholder, Wuxi Guolian Development Group, bought shares in Minsheng Securities via a public auction. 

(Updates throughout.)

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