Chinese securities firms would face greater risk of credit downgrade if the securities regulator substantially reduces the firms' internal rating that adversely affects their liquidity positions, global rating agency Moody's Investors Service said on Tuesday.

The firms have been in focus amid the ongoing government investigation for possible market malpractices.

"We are closely watching the regulator's move over the change of its internal rating on the securities firms," Sean Hung, an analyst at Moody's Investors Service, said at a news conference in Beijing.

"If substantial internal rating downgrade takes place and affects the firms' liquidity, it will increase the likelihood of Moody's downgrade," he said.

Moody's put CITIC Securities Co Ltd, China's largest securities brokerage, in the watching list for credit downgrade in September following the announcement that several senior executives of the firm have been under government investigation.

The rating agency said the challenging operating environment and the uncertain outcome of the pending investigation and regulatory actions have led to a weakening of the standalone credit profile of CITIC Securities.

But external liquidity support from its parent company CITIC Group and State-owned margin lender China Securities Finance Corp have helped offset some of the negative effects, the rating agency said.

Moody's maintained a stable outlook for CITIC Securities and kept its Baa1 foreign currency long-term issuer rating in a report issued last week.