Core Viewpoint - The growth of the Chinese securities industry is benefiting from economic development and capital market reforms, with leading Chinese brokers expected to accelerate their progress towards becoming world-class investment banks during the "14th Five-Year Plan" period, enhancing their business scale, professional capabilities, and profitability [2][7]. Industry Future Trends - The industry is poised to leverage diverse and complex financial needs from enterprises, institutions, and residents, leading to opportunities and higher service demands. Key strategies include creating "industrial investment banks" and "asset investment banks" to support economic transformation, enhancing global sales and multi-asset trading capabilities, and addressing wealth management needs through a "wealth investment bank" model [6][14][15]. Investment Value Understanding - The securities sector has historically been underweighted by investors due to competition homogenization and earnings volatility. However, improvements in industry structure, stability, and profitability are expected to enhance long-term investment value. Factors include regulatory emphasis on supporting strong firms, balanced business structures among leading brokers, and a focus on high-quality development [3][39][42]. 2026 Investment Opportunities - The industry is expected to maintain a relatively high level of prosperity, with an overall profit growth forecast of 12%. Key investment lines include the performance of investment banks and private equity leaders, brokers with strong institutional sales and trading services, and firms with significant international business growth [4][58][59].

Core Viewpoint - The A-share market is experiencing a strong rally led by the brokerage sector, with significant inflows and positive policy changes supporting this trend [1][4][10]. Group 1: Market Performance - The top-performing brokerage ETF (512000) opened high and saw a price increase of over 3%, closing up 2.1%, marking three consecutive days of gains [1][8]. - Individual brokerage stocks also performed well, with notable increases such as a nearly 7% rise for Industrial Securities and over 4% for Northeast Securities [1][8]. Group 2: Policy Support - The China Securities Regulatory Commission (CSRC) announced measures to expand capital space and leverage limits for brokerages, which is expected to enhance capital efficiency and profitability for leading firms [2][10]. - A recent adjustment in risk factors for insurance companies' investments in major indices is projected to release an additional 108.6 billion yuan into the market, providing substantial liquidity support [2][10]. Group 3: Financial Metrics - The net profit growth for the 49 listed brokerages in the first three quarters was 61.6%, while the price-to-book ratio stands at 1.47, indicating a relative undervaluation compared to historical levels [2][10]. - The brokerage sector is experiencing a divergence between high earnings growth and low valuations, creating potential for valuation recovery [2][10]. Group 4: Capital Inflows - Significant capital inflows into the brokerage sector were noted, with a net inflow of 5.946 billion yuan on December 5 and an additional 6.708 billion yuan recently [3][11]. - The brokerage ETF (512000) has seen a total net inflow of 1.881 billion yuan over the past 20 days, leading among similar ETFs [3][11]. Group 5: Investment Tools - The brokerage ETF (512000) and its linked funds provide an efficient investment tool that encompasses 49 listed brokerage stocks, catering to both large and small firms [6][13].

Group 1 - The A-share market has rebounded with a trading volume exceeding 1.2 trillion yuan, indicating a recovery in investor sentiment [1] - The leading securities ETF (560090) saw a significant increase in trading volume, rising by 1.65% with a turnover of nearly 95 million yuan, marking a 148% increase compared to the previous trading day [1][3] - Major components of the securities ETF index all experienced gains, with notable increases from Huaxin Co. and Dongwu Securities, both rising over 4% [3] Group 2 - In May 2025, fixed asset investment in China reached 191,947 billion yuan, reflecting a year-on-year growth of 3.7% [4] - The retail sales of consumer goods totaled 41,326 billion yuan in May, showing a year-on-year increase of 6.4% [4] - The industrial added value for large-scale enterprises grew by 5.8% year-on-year in May, indicating stable economic performance [4] Group 3 - The overall economic operation in May 2025 was stable, providing support for the upward movement of A-share listings [5] - The securities industry has shown significant recovery in performance, with a continuous increase in trading volume and a favorable policy environment [5][6] - The self-operated income of listed securities firms has maintained rapid growth, contributing to the overall performance recovery of the industry [5] Group 4 - The merger and acquisition market remains active, with several significant transactions and restructuring efforts underway, which are expected to enhance the synergy effects within the industry [6] - The valuation of the securities sector remains low, with the latest price-to-book ratio at 1.38x, indicating strong investment value [10] - The securities ETF (560090) tracks the CSI All Share Securities Companies Index, providing an efficient investment tool for exposure to the securities sector [10]

Investment Rating - The report maintains a positive investment rating for the securities industry, suggesting a focus on quality brokers with strong performance across multiple business lines, particularly highlighting Citic Securities, Huatai Securities, and China Galaxy Securities as key targets [6]. Core Insights - The A-share brokerage sector has experienced a turbulent performance in 2025, with the sector index down 9.2% year-to-date, underperforming the CSI 300 index by approximately 7.6 percentage points [1][10]. - The report indicates a recovery in earnings, with a significant increase in net profit for listed brokers, which rose to CNY 519 billion in Q1 2025, marking a year-on-year increase of 78.7% [2][28]. - The brokerage sector's revenue composition shows that proprietary trading and brokerage income accounted for over half of total revenues, with proprietary trading maintaining a high proportion since 2011 [2][36]. Summary by Sections 1. Overall Sector Performance - The brokerage sector has shown a fluctuating performance characterized by three distinct phases in 2025, with a notable recovery in valuations driven by policy support since mid-April [1][10][13]. 2. Earnings Summary - In Q1 2025, the total revenue for 43 listed brokers was CNY 1,261 billion, reflecting a year-on-year growth of 19.0%. The net profit for the same period was CNY 519 billion, up 78.7% year-on-year, indicating a strong recovery trend [2][28]. 3. Proprietary Trading - The proprietary trading income for listed brokers reached CNY 485 billion in Q1 2025, showing a year-on-year increase of 50.3%. This segment continues to support overall earnings despite a slight decline from previous highs [3][36]. 4. Brokerage Business - The brokerage business has remained active, with average daily trading volumes in the Shanghai and Shenzhen markets at CNY 2.07 trillion and CNY 1.75 trillion for Q4 2024 and Q1 2025, respectively. Brokerage income increased to CNY 330 billion in Q1 2025, up 43.1% year-on-year [4][36]. 5. Asset Management - The asset management business saw a decline in AUM, with an average management fee rate of 0.17%, down from the previous year. However, the report anticipates stabilization in AUM as the transition of existing asset management products progresses [4][36]. 6. Credit Business - The credit business reported a lending balance of CNY 16.2 trillion by the end of Q1 2025, reflecting a year-on-year increase of 33.3%, indicating a robust growth trajectory in this segment [3][36]. 7. Investment Banking - Investment banking revenues showed a mixed performance, with IPO underwriting down 31.7% year-on-year, while follow-on offerings increased by 83.1%. The report suggests that the bond underwriting market may stabilize following recent monetary policy adjustments [4][36]. 8. Investment Recommendations - The report recommends focusing on quality brokers with strong recovery potential across various business lines, particularly those that have demonstrated leadership in their respective segments [5][6].

Group 1 - The Securities ETF Southern (512900) experienced a significant increase, rising over 3% and aiming for a third consecutive gain, with a trading volume of 26.8858 million yuan as of 10:01 AM on May 7 [1] - The latest scale of the Securities ETF Southern reached 6.569 billion yuan, marking a one-month high [2] - The People's Bank of China announced a 0.5 percentage point reserve requirement ratio cut, injecting approximately 1 trillion yuan into the market, along with a 0.1 percentage point reduction in policy interest rates [2] Group 2 - In the first quarter, 50 listed securities firms reported a year-on-year net profit increase of 80%, with an adjusted net profit growth of 51% [3] - The expectation of continued capital market reforms and policies encouraging quality securities firms to strengthen through mergers and acquisitions suggests significant upward potential for the return on equity (ROE) and valuations in the securities industry [3] - The Securities ETF Southern closely tracks the CSI All Share Securities Company Index, indicating its alignment with the performance of the securities sector [3]