Core Insights - The report from CITIC Securities indicates that market volatility has increased since October, but the success rate of market timing remains low due to changes in the underlying structure of incremental capital, with steady absolute return funds entering the market, reducing the effectiveness of traditional aggressive timing strategies [1][3] Market Volatility and Timing - Since October, the market has experienced two rounds of emotional volatility, with the first triggered by Trump's new tariff threats leading to a rapid reduction in active capital and a drop in daily trading volume from 2.5 trillion yuan to 1.7 trillion yuan [1] - The second round of volatility occurred after the meeting between the US and Chinese leaders, where active capital reduced positions due to uncertainties in US-China relations and high market positions approaching year-end [1][2] Structural Opportunities - Despite the volatility, the number of stocks reaching new highs has increased, with 232 stocks hitting 12-month highs by November 6, compared to 216 on September 30 [2] - The number of stocks reaching new highs in the past month rose from 384 on September 30 to 680 on November 6, indicating ongoing structural opportunities in the market [2] Steady Capital Inflow - Steady absolute return funds are increasingly entering the market, diminishing the effectiveness of traditional active timing strategies [3] - The influx of funds through stable return products is driven by declining interest rates on deposits and bank wealth management products, leading to a potential theoretical increase of 1.56 trillion yuan in the A-share market if 30% of new insurance premiums are allocated to equities [3][4] Comparison of Fund Flows - In the first nine months of the year, active public funds raised approximately 109.5 billion yuan, while passive products raised about 327 billion yuan, indicating a significant disparity compared to the potential inflow from insurance [4] - The behavior of ETF flows shows a counter-cyclical characteristic, with net inflows occurring during market corrections, highlighting a trend of "buying on dips" [5][6] Key Variables Impacting Market Trends - The stability of the overseas business environment and the construction of AI infrastructure are crucial variables affecting market trends, with the A-share market increasingly influenced by global fundamentals and US-China relations [7] - The share of overseas revenue for A-share companies is approaching 20%, indicating a growing sensitivity to international economic cycles [7] AI Infrastructure and Market Sentiment - The sustainability of AI infrastructure investment is critical for both US and A-share markets, with significant exposure to AI-related sectors [8] - Concerns about the commercial viability of AI and its impact on investment costs are prevalent, as evidenced by rising CDS spreads for major North American tech companies [8] Portfolio Adjustment Strategies - CITIC Securities suggests focusing on sectors with independent growth potential and improving ROE, rather than solely on AI narratives, to mitigate risks associated with market volatility [9][10] - The consumer sector, with a market cap share of only 7.5%, is highlighted as a relatively independent investment opportunity worth monitoring [10]

Group 1 - The core viewpoint of the report indicates that China's ROE (Return on Equity) is on a rising trend while the US ROE is on a declining trend, suggesting a potential divergence in economic cycles between the two countries [2][3] - Recent data suggests that China's export and price data reflect the effects of anti-involution, with expectations for continued strengthening of corporate profits in China [3][8] - The debt expansion in the US AI industry may reinforce expectations for price improvement and corporate profitability in China, but it could also exacerbate stagflation characteristics in the US, posing risks to US stock performance [3][9] Group 2 - The report highlights a significant decline in China's export growth, with October exports showing a year-on-year decrease of 1.1%, down from 8.3% previously, primarily affected by a drop in exports to the EU [8] - The report notes that the global manufacturing PMI did not weaken in October, indicating that the decline in China's export growth may be more related to supply-side improvements rather than demand-side factors [8] - The report emphasizes that under a recovering price environment, market sentiment may shift towards value stocks, with a focus on export prices and US consumer data in the future [3][9] Group 3 - The report suggests that the configuration of energy investments should primarily respond to the overheating expectations of US AI investments, recommending a focus on short to medium-term trading strategies [3] - Long-term investment opportunities are identified in sectors such as insurance, anti-involution industries, Chinese internet companies, and military trade [3][9] - The report indicates that the performance of the A-share market is expected to rise while the US stock market may decline, reflecting the contrasting economic cycles of China and the US [3][9]

Group 1 - The A-share market is currently in a phase of balancing between policy expectations and economic realities, with a focus on maintaining reasonable liquidity through monetary policy [2] - The market is expected to shift from "monetary easing" to "fiscal expectations," with anticipated stronger fiscal policies aimed at expanding domestic demand and building a modern industrial system [2] - The "new quality productivity" and "domestic circulation" themes are expected to remain active despite the overall market maintaining a state of fluctuation [2] Group 2 - Growth style is expected to continue to outperform in the annual context, but the fourth quarter may see a stronger shift in investment styles, particularly towards undervalued sectors [3] - The strength of style changes in the fourth quarter may surpass that of valuation adjustments, influenced by the relative valuation advantages of value stocks compared to growth stocks [3] - The cyclical sectors may benefit from policies aimed at reducing competition and improving the fundamental outlook in the coming year [3] Group 3 - Recent market price increases are driven by anticipations of a cyclical upturn in the coming year, with historical patterns indicating that certain years are associated with rising PPI [4] - The overlap of China's five-year cycle and the U.S. four-year cycle is expected to culminate in a significant year for industrial metal prices in 2026 [4] - Current cyclical investment opportunities include sectors such as non-ferrous metals, steel, and building materials, which are seen as favorable for positioning [4] Group 4 - The market has experienced increased volatility since October, with a shift in the underlying structure of incremental capital affecting traditional aggressive timing strategies [5] - The stability of the corporate overseas environment and developments in AI are critical variables influencing market dynamics, impacting various sectors including TMT, non-ferrous metals, and chemicals [5] - The strategy for portfolio adjustment is focused on selecting stocks with a rising trend in ROE rather than avoiding AI narratives, which are seen as influencing market slopes rather than overall trends [5]

Financial Data and Key Metrics Changes - The company reported a net income of PEN 456 million for the quarter, representing an 81% increase year-over-year, with a return on equity (ROE) of approximately 16% [9][16] - The accumulated ROE for the first nine months of 2025 stands at 17.4%, which would have been 18.3% excluding the one-off impact from Rutas de Lima [15][16] - The risk-adjusted net interest margin (NIM) improved by 60 basis points over the past quarter, with a current NIM of 3.8% [9][28] Business Line Data and Key Metrics Changes - Interbank's loan portfolio grew by over 5% year-over-year, with higher-yielding loans increasing by 7% [21][39] - Interseguro reported strong performance in private annuities and life insurance, with retail premiums growing by 58% year-over-year [10][35] - Inteligo's assets under management reached new record highs, growing at a double-digit pace [7][32] Market Data and Key Metrics Changes - Peru's GDP growth was reported at 3.3% as of August, with private investment projected to grow by 6.5% by year-end [4][12] - Inflation in Peru remains low at around 1.7%, and the Peruvian sol has appreciated by approximately 10% this year [4][11] - The internal demand projection for 2025 has been revised upward to 5.1%, driven by strong growth in private investment and consumption [13][14] Company Strategy and Development Direction - The company aims to achieve digital excellence and deepen primary client relationships through data-driven services and innovation [7][10] - There is a focus on maintaining profitability while expanding into higher-yielding loan segments and enhancing the payments ecosystem with PLIN and Easy Pay [23][25] - The company is committed to long-term sustainability and profitability, adapting quickly to market changes [6][7] Management's Comments on Operating Environment and Future Outlook - Management maintains a cautious outlook due to international conditions and the pre-election period but remains optimistic about Peru's economic stability [4][5] - The company expects to navigate challenges related to pension fund withdrawals while focusing on higher-yielding segments [23][50] - The outlook for 2026 anticipates moderate growth in internal demand and a stable economic environment despite potential political uncertainties [12][14] Other Important Information - The company has provisioned around 40% of its exposure related to Rutas de Lima, which represents less than 1% of its total investment holdings [46][48] - The cost of risk remains low at 2.1%, with expectations for gradual increases as the consumer and small business portfolios expand [27][28] - The company continues to invest in technology and talent to support long-term growth ambitions, with a cost-to-income ratio of 37.7% [20][39] Q&A Session Summary Question: Regarding Rutas de Lima and its impairment level - Management indicated that 40% of impairment has been booked, and the situation is being closely monitored as legal proceedings continue [46][47] Question: Impact of pension withdrawals on retail growth - Management noted that pension withdrawals may have a short-term negative impact on growth but could also lead to increased liquidity and improved collections [50][51] Question: Expected loan growth for 2025 and 2026 - Management expects to continue accelerating growth in credit cards and consumer finance, with a focus on gaining market share [58][59] Question: Corporate-level disbursements in 2026 - Management anticipates mild growth in corporate activity, primarily focused on working capital replenishment and small CapEx, with no large projects expected [63][64]

Financial Data and Key Metrics Changes - The underlying EPS for Q3 2025 was $1.86, reflecting a 6% increase year over year [4][16] - Underlying net income reached $1.047 billion, up 3% from the previous year [16] - The underlying return on equity (ROE) was 18.3%, an increase from the prior year [17] - Book value per share grew 2% year over year, with a quarterly increase of 3% [19] Business Line Data and Key Metrics Changes - Individual protection sales increased by 35%, while group health and protection sales grew by 12% [4] - Health and protection underlying earnings decreased by 18% year over year due to unfavorable insurance experience in the U.S. [16] - Asset management and wealth underlying earnings rose by 5% year over year, driven by improved credit and higher fee income [16] - SLC Management's underlying net income was $54 million, up 15% year over year [21] Market Data and Key Metrics Changes - In Asia, individual protection sales grew by 38% year over year, with double-digit growth in six markets [26] - Canada reported net income of $422 million, a 13% increase from the prior year, driven by strong business growth [22] - U.S. underlying net income was $107 million, down 34% from the previous year, primarily due to unfavorable insurance experience [23] Company Strategy and Development Direction - The company aims for a medium-term objective of 10% underlying earnings growth and a 20% ROE [13] - Focus on improving U.S. dental business performance through repricing and growth of the commercial business [6] - Continued investment in asset management capabilities, with a target of leveraging synergies between asset management and insurance businesses [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating industry challenges, particularly in the U.S. health care space [5] - The company anticipates gradual improvement in the U.S. dental business as pricing adjustments are made [6] - Strong fundamentals and diversified business mix are expected to support continued growth [26] Other Important Information - The company announced a $0.04 increase in its dividend to $0.92 per share and repurchased approximately $400 million of shares in the quarter [7] - The LICAT ratio was reported at 154%, indicating a strong capital position [7] Q&A Session Summary Question: Expectations for Medicaid repricing starting in 2026 - Management is making reasonable progress with states on pricing, with gradual improvements expected in 2026 [36] Question: Growth in U.S. commercial premiums - Premiums have grown over 30% since the acquisition, with expectations for continued growth in commercial dental [38] Question: Details on asset management flows - The company noted lumpiness in flows but highlighted significant institutional gross sales and positive net inflows in public fixed income and active ETFs [42][46] Question: Unfavorable insurance experience in medical stop loss - The unfavorable experience was attributed to pricing shortfalls and late emergence of claims, with updates to loss ratio assumptions being made [54][58] Question: Outlook for Medicaid dental loss ratio - Management expects gradual improvement in the loss ratio as pricing adjustments are implemented [69] Question: Targeted return of 7% in stop loss - The current after-tax margin was reported at 6.9%, with expectations to move towards the targeted margin over time [108]

Investment Rating - The report maintains a "Recommend" rating for the company with a target price of 9.52 CNY [2][9]. Core Insights - The company's net profit for Q3 increased by 71% year-on-year, benefiting from market fluctuations. The return on equity (ROE) improved significantly, reaching 4.2%, up by 1.6 percentage points year-on-year [2][9]. - The overall business performance is positively correlated with market conditions, with notable growth in brokerage services, which saw a year-on-year increase of 152.3% [3][9]. - The company is progressing with its merger with Guorong Securities, which is expected to expand its business scale and development potential [9]. Financial Performance Summary - The total revenue for the reporting period, excluding other business income, was 36 billion CNY, representing a year-on-year increase of 38.4% [7]. - The net profit attributable to the parent company was 12.4 billion CNY, up 70.6% year-on-year [7]. - The company's total assets, excluding client funds, reached 820 billion CNY, an increase of 62 billion CNY year-on-year, with a net asset value of 297 billion CNY, up 14.2 billion CNY [8]. Business Segment Performance - Proprietary business revenue totaled 1.85 billion CNY, with a quarterly revenue of 590 million CNY, showing a decrease from the previous quarter [3]. - Brokerage business revenue was 980 million CNY for the quarter, reflecting a 68.5% increase quarter-on-quarter and a 152.3% increase year-on-year [3]. - Investment banking revenue was 280 million CNY, with a slight year-on-year increase [3]. Market Position and Valuation - The company’s current share price is 8.61 CNY, with a market capitalization of 38.483 billion CNY [4]. - The projected earnings per share (EPS) for 2025, 2026, and 2027 are 0.33 CNY, 0.35 CNY, and 0.38 CNY respectively, with corresponding price-to-book (PB) ratios of 1.31, 1.27, and 1.23 [10][9].

Core Viewpoint - The article highlights a stabilization and rebound in the ROE (Return on Equity) of A-shares, indicating a recovery in overall profitability across the market, with significant improvements in growth sectors such as TMT and the ChiNext board [3][4]. Group 1: Overall Market Performance - The ROE of the entire A-share market increased from 6.74% in Q3 2022 to 6.80% in Q3 2023, marking a year-on-year growth of 0.75% and breaking a downward trend [5][6]. - The growth sectors, particularly the ChiNext and technology-focused indices, showed substantial improvements, with the ROE of the ChiNext index rising by 12.30% year-on-year [7][8]. Group 2: Sector Analysis - The TMT (Technology, Media, and Telecommunications) sector maintained high growth, with the ROE of technology leaders increasing from 8.04% to 10.26%, a growth of 27.59% [16]. - The consumer sector exhibited mixed results, with the ROE of the consumer index declining from 17.18% to 16.51%, while the household appliances sector showed a slight increase from 12.66% to 12.90% [17][18]. - The pharmaceutical sector showed signs of stabilization, with the overall ROE rising from 8.43% to 8.52%, while the renewable energy sector began to show improvement, with the ROE of the photovoltaic industry increasing from 1.50% to 1.75% [19][20]. Group 3: Profitability Drivers - The rebound in A-share ROE is primarily driven by improvements in net profit margins and stabilization in asset turnover rates, indicating enhanced operational efficiency rather than increased leverage [22][23]. - The sectors with the most significant revenue improvements include TMT, financial services, and midstream manufacturing, while the consumer sector remains under pressure [24].

Group 1 - The overall A-share market has entered a continuous upward profit cycle, with Q3 2025 net profit growth of 11.3% YoY for all A-shares and 3.9% for non-financial A-shares, significantly up from Q2 2025 figures of 1.3% and -2.1% respectively [10][14][18] - The forecast for 2025 net profit growth for all A-shares and non-financial A-shares has been revised to a neutral 5.4% and 5.1% respectively, with Q4 2025 expected to show continued recovery in net profit growth [2][15][18] - Q3 2025 return on equity (ROE) for all A-shares was 7.9%, a slight increase from Q2, with net profit margin rising and asset turnover slightly declining [3][25][29] Group 2 - Growth in profit margins is leading over value, with significant contributions from the electronics, non-ferrous metals, steel, and new energy sectors in Q3 2025 [4][30][33] - The cumulative net profit growth for the ChiNext Index in Q3 2025 was 20.1%, compared to 4.9% for the SSE 50, indicating a clear advantage for growth style over value style [30][31] - Most industries reported positive profit growth in Q3 2025, with electronics, non-ferrous metals, steel, and new energy contributing the most, while real estate and agriculture sectors showed significant declines [4][33][39]

Investment Rating - The report maintains a "Recommendation" rating for Huatai Securities (601688) [1][9] Core Views - The overall performance of the company meets expectations, with a stable ROE year-on-year, primarily due to a high base from the previous year related to the sale of AssetMark [1][9] - The company’s total revenue for the reporting period was 266 billion yuan, a year-on-year increase of 10.3%, while the net profit attributable to the parent company was 127.3 billion yuan, up 1.7% year-on-year [7][9] Financial Performance Summary - The company's ROE for the reporting period was 6.2%, down 0.5 percentage points year-on-year, with a quarterly ROE of 2.5%, up 0.6 percentage points quarter-on-quarter but down 1.4 percentage points year-on-year [1] - The financial leverage ratio at the end of the reporting period was 3.68 times, an increase of 0.33 times year-on-year and 0.4 times quarter-on-quarter [1] - The net profit margin for the reporting period was 47.9%, down 4.1 percentage points year-on-year, with a quarterly net profit margin of 48.2%, up 2.3 percentage points quarter-on-quarter but down 13 percentage points year-on-year [1] Business Segment Performance - Proprietary business revenue totaled 10.22 billion yuan, with a quarterly revenue of 3.59 billion yuan, down 2.8 billion yuan quarter-on-quarter [2] - Interest income from credit business was 10.04 billion yuan, with a quarterly income of 3.62 billion yuan, up 3.9 million yuan quarter-on-quarter [2] - Brokerage business revenue significantly increased to 6.59 billion yuan, with a quarterly revenue of 2.83 billion yuan, up 56% quarter-on-quarter and 128.1% year-on-year [2] Market and Valuation - The target price for Huatai Securities is set at 24.50 yuan, with the current price at 21.72 yuan, indicating potential upside [4][9] - The expected EPS for 2025, 2026, and 2027 is projected to be 1.91, 2.07, and 2.26 yuan respectively, with corresponding PB ratios of 1.13, 1.06, and 1.00 [9][10]

Core Insights - A-shares in the non-financial sector have shown signs of recovery, with a year-on-year net profit growth of 1.65% in Q3 2025, compared to 0.89% in the mid-year report [4][6] - The return on equity (ROE) for non-financial A-shares has remained stable over three consecutive quarters, recorded at 6.56% for Q3 2025, slightly down from 6.57% in the mid-year report [6][7] - Major A-share indices have collectively improved in net profit growth, particularly in the technology sector, with notable increases in the ChiNext Index (+6.3%), the Growth Enterprise 50 (+11.5%), and the Sci-Tech 50 (+16.4%) [9][10] Financial Performance - Non-financial A-shares reported a 1.2% year-on-year growth in net profit for Q3 2025, contributing an additional 248 billion yuan compared to the previous year [2] - The cumulative revenue growth for non-financial A-shares in Q3 2025 was 0.31%, a recovery from a decline of 0.56% in the mid-year report [4] - The sales profit margin for non-financial A-shares increased to 4.12% in Q3 2025, up from 4.09% in the mid-year report, indicating a decrease in expense ratios rather than an increase in gross margins [7][6] Sector Contributions - Key sectors contributing to profit growth in Q3 2025 include non-ferrous metals (157 billion yuan), electronics (117 billion yuan), and steel (104 billion yuan) [2] - Sectors such as real estate, coal, and oil & petrochemicals continue to exert significant downward pressure on overall performance, with real estate showing a negative profit contribution of 407.5 billion yuan [2][11] - The technology, media, and telecommunications (TMT) sector, along with essential consumer goods, have shown positive profit growth, indicating a shift in market dynamics [11][12]