Investment Rating - The industry investment rating is maintained at "Overweight" [2][6] Core Views - Despite a slight decline in market trading volume, trading activity remains high, and current valuations are at reasonable levels. The performance of brokerage firms is expected to continue recovering in the third quarter. With the new public fund sales fee regulations implemented, the public fund industry is entering a phase of high-quality development [6][31]. Summary by Sections Market Review - The market experienced increased volatility with the Shanghai Composite Index down 1.2% and the Shenzhen Component Index down 0.8% during the week of September 1-5. The non-bank financial index fell by 5%, underperforming the CSI 300 Index by 4.2 percentage points. The brokerage index decreased by 5.3%, also underperforming the CSI 300 Index by 4.5 percentage points. The brokerage index's price-to-book ratio is at 1.46x, slightly down from the previous week, and is at the 44th percentile of the past decade [3][9]. Industry Weekly Data Brokerage Business - The average daily stock trading volume in the Shanghai and Shenzhen markets reached 25,696 billion yuan, a 13% decrease week-on-week. Despite this decline, trading volume remains high, comparable to the peak in October 2024 [4][15]. Investment Banking Business - In August, 21 companies conducted equity financing totaling 23.5 billion yuan, a 71% year-on-year increase but a 65% decrease month-on-month. The IPO scale was 4.1 billion yuan, down 23% year-on-year and 83% month-on-month. Cumulatively, from January to August, equity financing increased by 304% year-on-year [4][18]. Capital Intermediation Business - As of September 5, the margin trading balance reached 22,795 billion yuan, a 0.8% increase week-on-week, accounting for 2.68% of the total market capitalization of A-shares. The financing balance rose to 22,642 billion yuan, while the securities lending balance was 15.3 billion yuan, down 3.5% [5][21]. Industry Policy Tracking - On September 5, the China Securities Regulatory Commission revised the regulations on public fund sales fees, marking the completion of the third phase of public fund fee reforms initiated in 2023. Key changes include lowering the maximum subscription fees for various fund types and optimizing redemption arrangements to encourage long-term holding [27][30]. Investment Recommendations - The report maintains an "Overweight" rating for the securities industry, suggesting a focus on internet brokerages with strong beta characteristics, such as Guideline, in the context of active market trading [6][31].

Core Insights - The public fund industry in China is undergoing significant transformation due to the fee reduction reform initiated by the China Securities Regulatory Commission (CSRC) in July 2023, which has led to a shift in focus from active to passive fund management [1][3][8] - The reform has resulted in a notable decline in management fees, particularly affecting small and medium-sized fund management companies, which are struggling to maintain profitability [6][10] - The emergence of new fund models, such as floating fee rate funds, aims to align the interests of fund managers and investors more closely, enhancing the overall investment experience [9][11] Group 1: Fee Reduction Impact - The fee reduction reform has set a cap on management fees for active equity funds at 1.2% and custody fees at 0.2%, effective from July 7, 2023, impacting both new and existing funds [3][4] - As a result of the reform, the issuance of equity index funds has surged, with new issuance reaching 1,880.59 billion yuan in the first half of 2023, marking a significant shift towards passive investment strategies [4][5] - The competitive landscape for ETFs has intensified, with many large public funds focusing on passive products to drive revenue growth amid declining management fees [5][10] Group 2: Challenges for Small and Medium-sized Firms - Small and medium-sized public funds are facing severe challenges, with over 56% of fund managers reporting a decline in management fee income, some experiencing drops exceeding 50% [6][7] - These firms are focusing on improving product performance rather than expanding their offerings, as they struggle to compete for market share and access to distribution channels [7][10] - The pressure to reduce costs has led to cuts in marketing and operational expenses, impacting the overall growth potential of these smaller firms [8][10] Group 3: Strategic Adaptations - The industry is witnessing a structural reform aimed at enhancing the quality of fund offerings, with a focus on consolidating resources towards leading products [8][10] - Fund managers are increasingly investing in research and development capabilities to improve performance and attract investors, despite the pressure on fees [10][11] - The introduction of floating fee rate funds is seen as a way to better align the interests of fund managers with those of investors, potentially improving investor satisfaction and retention [9][11]