Fitch Ratings believes that deeper integration between Hong Kong and mainland China capital markets will enhance the financial profiles of Fitch-rated Hong Kong securities firms and reinforce the view of their strategic importance to their Chinese parent companies.

These firms are better positioned than local peers to expand market share and standing, supported by their established and closer linkages with Chinese enterprises that have rising offshore financing needs, as well as growing investor demand for cross-border wealth management services.

Fitch expects rated Hong Kong brokers, especially the Hong Kong subsidiaries of Chinese securities firms, to capture a larger share of initial public offering (IPO) activity.

This is supported by the growth of dual listings and technology-related deals, where these firms have established client relationships and execution advantages.

Given that rated Hong Kong brokers have a higher reliance on equity market-related transactions, a continuously improving capital market environment should further support their profitability improvement.

Fitch believes that in the medium term, cross-border stock market connectivity is expected to extend to the bond market.

Policies aimed at developing Hong Kong's bond market will help achieve this goal and assist rated companies in diversifying their revenue sources.

However, most rated Hong Kong brokers remain relatively small in scale; if market sentiment shifts significantly, capital flows from mainland investors could reverse, which could in turn affect the financial profiles of most Fitch-rated Hong Kong securities firms.