1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In late Q1, institutional behavior in the bond market has changed. The allocation disk has strong buying power, while funds and wealth management products are relatively weak. The "fixed - income +" products are facing significant redemption pressure, and the bond market strategy focuses on short - term 3 - 5y term spread compression and long - term opportunities after over - decline [1][3][4]. 3. Summary by Directory 3.1 First Quarter: Characteristics of Bond Buying by Various Institutions 3.1.1 Overall Bond Buying by Institutions in Q1: Strong Allocation Disk, Weak Funds and Wealth Management - **Allocation Disk**: Large banks significantly increased net purchases of government bonds over 5y. Small and medium - sized banks increased net purchases of 30y government bonds and 20y local bonds. Insurance companies, driven by dividend - paying insurance, included 3 - 5y Tier 2 and perpetual bonds in their top five holdings [13]. - **Trading Disk**: Securities firms' net purchases were in line with seasonality, with a significant reduction in duration, more allocation to 1y interest rates and Tier 2 and perpetual bonds, and reduction of ultra - long bonds. Funds still focused on credit coupons, increasing the proportion of 1 - 5y credit and Tier 2 and perpetual bonds [13]. - **Bank Wealth Management**: In Q1, due to the priority of "deposit rush" tasks in the banking system, the scale growth of bank wealth management was weak, and the net purchases of direct investment and entrusted investment in the secondary market both increased less. In terms of structure, direct investment shortened the term, and entrusted investment increased the exploration of spreads in policy - financial bonds [14]. 3.1.2 By Institution: Insurance Enters the Allocation Window at the End of the Quarter, and Wealth Management Will Follow in Q2 - **Banks**: They have a strong demand for long - term bonds. At the end of the quarter, the pressure to realize profits is not large, and there is still a need for bond allocation in the future [18]. - **Insurance**: The "good start" funds entered the allocation window in March, and the bond - allocation progress is slower than last year, with potential for further allocation. Attention should be paid to the spread compression opportunities of ultra - long local bonds in Q2 [23]. - **Funds**: From the end of Q1 to Q2, there is usually a seasonal recovery in bond - buying power. In Q2, it is conducive to the spread compression of policy - financial bonds [25][28]. - **Wealth Management**: It is expected to see scale growth and a peak season for bond allocation in Q2. Attention can be paid to the spread compression opportunities of Tier 2 and perpetual bonds [29]. - **Securities Firms**: They continue to short - sell 30y government bonds and start to buy 50y government bonds [30]. 3.2 "Fixed - Income +" Redemption: How Big Is the Pressure? 3.2.1 Recent "Fixed - Income +" Redemption: Greater Pressure than in November 2025 and January 2026, Close to the Russia - Ukraine Conflict Period - In March, the equity market declined, and the Shanghai Composite Index fell below 4000 points, leading to a significant increase in the redemption pressure of "fixed - income +" funds. The redemption pressure is stronger than in the previous two rounds and is close to that during the Russia - Ukraine conflict [34][41]. 3.2.2 When Will the Redemption Ease? Pay Attention to the Policy - making Layer's Expectations for Market Stability and the Use of Tools - The central bank recently held a party committee meeting, showing an earlier demand to maintain the stable operation of the stock market. Looking back at the situation after the Russia - Ukraine conflict in 2022, relevant meetings and policies helped stabilize the market. The central bank has innovated a series of financial policies to support the stable operation of the capital market. In the future, attention should be paid to the changes in the "claims on other financial corporations" item [43][44][47]. 3.3 Bond Market Strategy: Focus on 3 - 5y Term Spread Compression in the Short - Term and Seize Opportunities after Over - Decline in the Long - Term 3.3.1 This Week: α Spread Compression for Bonds within 5y - This week, the short - term bonds performed well. The certificate of deposit (CD) yield dropped close to 1.5%, driving the α spread compression of bonds within 5y [48]. 3.3.2 Short - Term: Limited Downward Space for 1y Bonds, Potential for Continuous Compression of 3 - 5y Spreads - The space for 1y short - term leverage to capture interest rate spreads has been extremely compressed, and the focus of bond selection may shift to 3 - 5y bonds. CDs may fluctuate at a low level of 1.5 - 1.55% in the short term, and attention should be paid to the marginal changes in funds at the end of the quarter [51][56]. 3.3.3 Long - Term: 10y Government Bonds to Fluctuate between 1.8% - 1.85%, 30y Government Bonds' Sentiment to Stabilize, Pay Attention to Over - Decline Recovery - **10y Government Bonds**: It is expected to fluctuate in a narrow range of 1.8% - 1.85%. It is recommended to hold existing assets and gradually increase positions for incremental funds if the yield continues to rise. - **30y Government Bonds**: The core fluctuation range of the 30 - 10y active bond spread may be 40 - 50bp. Traders can pay attention to trading opportunities when the spread widens to over 50bp, and allocators can gradually enter the market when the 30y government bond yield rises above 2.3%. Attention can also be paid to the spread - mining value of 4 - 5y China Development Bank bonds, 10y China Development Bank bonds, and 20y local bonds [57][60][61]. 3.4 Interest - Rate Bond Market Review: CDs Hit a New Low, and the Yield Curve Steepened - **Funding**: The central bank's open - market operations (OMO) had a net injection, and the funding situation was balanced and loose [76]. - **Primary Issuance**: The net financing of government bonds and local bonds increased, while that of policy - financial bonds and inter - bank CDs decreased [80]. - **Benchmark Changes**: The term spreads of government bonds and China Development Bank bonds both widened [86].

Investment Rating - The report maintains a "Recommended" rating for all key companies in the non-bank financial sector [2][4]. Core Insights - The non-bank financial sector is expected to benefit from a stable capital market, with significant improvements in trading activity leading to a recovery in brokerage performance [8]. - The report forecasts a year-on-year increase in brokerage business revenue of 45% for Q1 2026, driven by a substantial rise in average daily trading volume [8]. - The insurance sector is projected to see strong growth in new premium income, although the structure of products may lead to a decline in the margin of new business value (NBV) for life insurance [8]. - The leasing sector is expected to show stable performance, with traditional leasing companies benefiting from lower interest rates, while demand in automotive finance remains strong [8]. Summary by Sections Brokerage Sector - The average daily trading volume for the market is expected to reach 3.3 trillion yuan, representing a year-on-year increase of 88% [8]. - Investment business revenue for the brokerage sector is anticipated to grow by 20% year-on-year in Q1 2026 [8]. - The investment banking business revenue is projected to increase by 70% year-on-year [8]. Insurance Sector - New premium income is expected to grow rapidly due to the shift in deposit behavior and the insurance companies' focus on bancassurance channels [8]. - The year-on-year growth rates for life insurance companies' NBV are forecasted as follows: China Ping An > China Life > New China Life > China Pacific Insurance [8]. - The combined ratio (COR) for property insurance is expected to improve year-on-year due to reduced disaster losses and cost-cutting measures [8]. Leasing Sector - Traditional leasing companies are expected to maintain stable performance, while aircraft leasing faces supply-demand pressures [8]. - The automotive finance sector is projected to continue growing due to strong demand [8]. - The expected year-on-year growth rates for net profit of leasing companies are as follows: Shengye > Yixin Group > Jiangsu Jinzu > Bohai Leasing > Bank of China Aviation Leasing > China Shipbuilding Leasing > Far East Horizon [8]. Investment Recommendations - The report suggests that the non-bank financial sector will benefit from favorable economic conditions and supportive policies, leading to improved market sentiment and valuation recovery [8].

Investment Rating - The report maintains an "Accumulate" rating for the non-bank financial sector [5]. Core Insights - The draft of the Financial Law aims to provide legal support for high-quality financial development, emphasizing the importance of long-term capital market stability and the optimization of financial institutions [1][2]. - The insurance sector is expected to benefit from long-term trends such as the migration of deposits and increasing demand for healthcare and pension security, despite short-term market adjustments [3][28]. - The securities sector is experiencing heightened market risk appetite and active trading, with IT companies and brokerages benefiting from favorable valuations and performance [3][28]. Summary by Sections Industry Dynamics - The non-bank financial sector, securities, and insurance indices experienced declines of -2.55%, -2.79%, and -1.99% respectively, while the Shanghai Composite Index fell by -3.38% [11]. - The ten-year government bond yield was reported at 1.8299%, reflecting a slight increase from the previous week [15]. Insurance - The National Financial Supervision Administration is seeking public opinion on a revised complaint handling management method for banking and insurance institutions, aimed at protecting consumer rights [14]. - Key personnel changes include Zhang Jianying being appointed as the general manager of Ping An Asset Management and Zhu Xiaoyun as the president of China Reinsurance [14]. Securities - The China Securities Regulatory Commission held a meeting to discuss the "14th Five-Year Plan" for capital markets, focusing on enhancing market resilience and investor returns [18]. - As of March 20, 2026, the average daily trading volume of stock funds was 27,438.10 billion yuan, a decrease of 10.03% from the previous week, while the margin trading balance was 26,501.28 billion yuan, down 0.55% [20].

Core Viewpoint - The market is experiencing significant divergence in expectations regarding the impact of the Iran conflict, with three core questions remaining unanswered until April: the extent of resumption of navigation after conflict intensity decreases, whether the Federal Reserve prioritizes inflation indicators or actual employment conditions, and whether China faces cost shocks or opportunities for supply chain shifts [1][14]. Group 1: Iran Conflict and Market Impact - There are two contrasting views on the Iran conflict: one suggests that the conflict's intensity has decreased and that navigation will resume, while the other argues that navigation has not yet recovered and supply chain disruptions are not fully reflected [2][16]. - As of March 19, 2026, only five vessels were passing through the Strait of Hormuz, indicating no signs of large-scale resumption of navigation, with daily passage numbers significantly lower than pre-conflict levels [5][19]. - The current oil tanker rental rates have surged from $10-20 per ton to $60-80 per ton, with some periods exceeding $90 per ton, marking a historical peak [5][19]. Group 2: Federal Reserve's Focus - There are two opposing views regarding the Federal Reserve's focus: one suggests that inflation risks are increasing and liquidity is tightening, while the other argues that employment prospects are more significantly impacted by AI, making tightening unlikely [3][17]. - Following the March 18 Federal Reserve meeting, market data indicated that the implied number of rate cuts for the year remained low, between 0-1 [3][17]. - The employment market is showing signs of weakness, with negative job growth reported in February and downward revisions to previous employment data [6][20]. Group 3: China's Energy Dependency and Supply Chain Resilience - There are two perspectives on China's situation: one indicates that prolonged conflict will significantly impact China due to high oil import dependency, while the other suggests that China's supply chain resilience has improved, with a notable decrease in oil dependency [4][18]. - China's oil import dependency has decreased from 2.2% of GDP fifteen years ago to 1.7% currently, and existing reserves can meet over 90 days of consumption [4][18]. - China's energy diversification strategy has been long-term, with potential additional supply sources capable of covering risks associated with the Strait of Hormuz [4][18]. Group 4: Market Behavior and Future Outlook - The market has seen some short-term reduction in positions, particularly in sectors that had previously seen significant gains, with a notable divergence in performance among different sectors [8][22]. - The market's volatility is attributed more to absolute return funds reducing positions rather than institutional reallocation, with low-valuation stocks performing better than high-valuation stocks [8][22]. - The market is expected to remain in a narrative-driven phase until April, when key questions regarding the Iran conflict and its implications will begin to be answered [9][23].

Investment Rating - The investment rating for the non-bank financial sector is "Positive" (maintained) [1] Core Insights - The insurance sector has seen an adjustment in the pricing coefficient range for new energy vehicle insurance, expanding from [0.6-1.4] to [0.55-1.45], which is expected to benefit underwriting profits for insurers [4] - In 2026, insurance capital has participated in cornerstone investments for 11 Hong Kong IPO companies, with a total subscription amount of approximately 1.714 billion HKD, indicating strong support from regulatory bodies for insurance funds to increase market participation [5] - The acquisition of Yao Cai Securities by Ant Group has been approved, which is expected to enhance the competitive advantage of Yao Cai Securities through the integration of technology and customer resources [6] - The release of the "Investment Advisor Competency Model" by the China Securities Association aims to professionalize the investment advisory workforce in the securities industry, aligning with the shift towards wealth management services [6] - The national economic plan emphasizes the development of futures and derivatives markets, indicating increased policy support for the futures industry [7] Summary by Sections Key Industry Data - The report includes various charts detailing changes in daily stock trading volumes and margin balances, which are critical for understanding market dynamics [11] Key Company Announcements - Dongfang Caifu reported a total revenue of 16.07 billion CNY for 2025, a year-on-year increase of 38.46%, with a net profit of 12.08 billion CNY, up 25.75% [19] - Zhong An Online announced a total premium of 35.735 billion CNY for 2025, reflecting a growth of 6.9%, with a net profit increase of 198.3% [20] - Shou Chuang Securities achieved a revenue of 2.528 billion CNY, a 4.58% increase, with a net profit of 1.056 billion CNY, up 7.26% [21] - Xiangcai Securities reported a revenue of 2.012 billion CNY, a growth of 21.94%, with a net profit increase of 118.08% [22] - Sunshine Insurance reported a net profit of 6.31 billion CNY, a 15.7% increase, with a new business value of 7.64 billion CNY, up 48.2% [23]

Core Insights - The report emphasizes the importance of strengthening market stability mechanisms and highlights potential left-side opportunities in the non-bank financial sector [1][7]. Group 1: Market Performance - As of March 21, 2026, the Shanghai Composite Index was at 3957.05 points, down 3.38%, while the Shenzhen Component Index fell 2.90% to 13866.20 points. The CSI 300 Index decreased by 2.19% to 4567.02 points, and the ChiNext Index rose by 1.26% to 3352.10 points [12]. Group 2: Industry Dynamics and Weekly Commentary Insurance Sector - The report indicates that the insurance sector is guided by the two sessions to develop a high-quality growth blueprint. As of March 20, 2026, the 10-year government bond yield was 1.83%, up 2 basis points from the previous week. The insurance sector is advised to be actively monitored due to its improving fundamentals and increasing equity investment ratio, which reached 14.8% by the end of 2025, up 2.1 percentage points from 2024 [15][18]. - The solvency ratio for life insurance companies was 115%, significantly above the regulatory threshold of 50%, indicating a strong capacity to maintain equity investments despite market fluctuations [15][18]. Securities Sector - The report discusses the introduction of the first financial law draft aimed at enhancing financial governance and promoting high-quality development. This draft, released on March 20, 2026, focuses on strengthening regulation, risk prevention, and facilitating high-quality growth in the financial sector [18][19]. - The draft aims to establish a comprehensive regulatory framework, clarifying responsibilities and enhancing risk management capabilities across financial institutions [19][21]. Group 3: Investment Recommendations - The report suggests focusing on specific stocks within the insurance sector, including China Ping An (A/H), China Life (A/H), and China Pacific Insurance (A/H), due to their favorable valuation and growth potential [15][18]. - In the securities sector, recommended stocks include Guotai Junan (A/H), China Merchants Securities (A/H), and CITIC Securities (A/H), which are expected to benefit from the ongoing market reforms and stability mechanisms [7][15].

Investment Rating - The industry investment rating is "Overweight," indicating an expected outperformance of the industry index relative to the benchmark by more than 5% over the next six months [52]. Core Insights - The solvency of insurance companies refers to their ability to fulfill insurance obligations, pay claims, and meet due payments, which is crucial for maintaining trust with policyholders [3][8]. - The regulatory framework for solvency has evolved from a focus on scale to a risk-oriented approach, with the introduction of the second-generation solvency system in 2016, which emphasizes detailed risk management [9][11]. - The solvency ratio is critical for insurance companies as it affects their operational capabilities, including dividend distributions, new business operations, and investment strategies [25][29]. - Insurance companies are required to publicly disclose solvency reports quarterly, which include key indicators such as solvency ratios and major operational metrics, providing insights into their financial health [30][36]. Summary by Sections 1. Definition of Solvency - Solvency is defined as the ability of an insurance company to meet its insurance responsibilities and obligations to policyholders [3][8]. 2. Evolution of the Solvency Regulatory Framework - The transition from the first-generation solvency system, which focused on scale, to the second-generation system, which emphasizes risk management, began in 2003 and was fully implemented by 2016 [9][11]. - The second-generation system has undergone three phases, with the first phase focusing on establishing a risk-oriented framework and the second phase enhancing regulatory depth and capital quality [15][16]. 3. Importance of Solvency for Insurance Companies - Insufficient solvency can lead to regulatory actions, including restrictions on dividends, new business operations, and investment strategies [25][29]. - Even when solvency requirements are met, the level of solvency can impact various business aspects, such as investment limits and premium growth rates [29][39]. 4. Disclosure Rules for Solvency Information - Insurance companies must disclose solvency reports quarterly, with specific timelines for listed and non-listed companies, ensuring transparency in their financial status [30][36]. - The reports include essential indicators like solvency ratios, insurance revenue, net profit, and investment returns, which are vital for assessing the company's operational status [36][39]. 5. Current Status of Solvency in the Insurance Industry - Following the implementation of the second-generation system, solvency ratios generally declined, particularly among life insurance companies, but have shown signs of stabilization due to capital injections and debt issuance [39][42]. - As of the end of 2025, the comprehensive and core solvency ratios for life insurance companies were reported at 169% and 115%, respectively, remaining above regulatory requirements [39][42].

Group 1: Regulatory Changes in Wealth Management - The Financial Regulatory Bureau released the "Interim Measures for the Regulatory Rating of Wealth Management Companies" on March 16, 2026, aimed at guiding the quality development of the wealth management industry [3]. - The rating measures emphasize risk-based and capability-oriented assessments, giving high weight to asset management capabilities and risk management [4]. - The industry is expected to focus on "quality improvement" rather than "scale expansion" in 2026, with an estimated annual growth of 2-3 trillion yuan, reflecting a year-on-year decrease in growth [4]. Group 2: Company Performance Insights - Li Ning (2331.HK) reported a revenue of 29.6 billion yuan for 2025, a year-on-year increase of 3.2%, while net profit decreased by 2.6% to 2.94 billion yuan, with earnings per share (EPS) at 1.14 yuan [8]. - Cangge Mining (000408.SZ) achieved a revenue of 3.577 billion yuan in 2025, up 10.03%, and a net profit of 3.852 billion yuan, marking a significant year-on-year increase of 49.32% [10]. - JianTao Laminated Board (1888.HK) reported a revenue of 20.4 billion HKD for 2025, a 10% increase, and a net profit of 2.442 billion HKD, up 83.6% year-on-year, driven by price increases in copper-clad laminate products [19]. - ZhongAn Online (6060.HK) saw a revenue increase of 6.2% in 2025, with adjusted net profit rising by 198.3%, indicating a positive trend in profitability [24]. - AIA Group (1299.HK) reported a year-on-year decline of 8.8% in net profit for 2025, but new business value (NBV) increased by 17.1%, suggesting potential for future growth [28].

Group 1 - The China Development Forum 2026 will be held from March 22 to 23 in Beijing, focusing on "The 14th Five-Year Plan of China: High-Quality Development and Co-Creating New Opportunities" [2] - The U.S. has conditionally relaxed oil sanctions on Iran for 30 days, allowing the delivery and sale of Iranian crude oil and petroleum products already loaded by March 20 [3] - The Iranian nuclear facility at Natanz was attacked, with Iran claiming it violated international laws, while the U.S. and Israel plan to significantly increase military actions against Iran [4] Group 2 - The Chinese government is encouraging multinational companies to increase investments in China, highlighting the stable and improving economic environment [5] - The insurance industry is experiencing pressure due to solvency regulations, but major players maintain that the impact on the market is limited [4] - The Ministry of Ecology and Environment is enhancing support for green and low-carbon development among private enterprises [9] Group 3 - The international oil price has surged due to escalating conflicts in the Middle East, raising concerns about inflation in the U.S. and potential interest rate changes by the Federal Reserve [14][15] - The World Trade Organization warns that the Middle East conflict could impact global trade through rising oil prices and fertilizer supply shortages [15] - Brazilian President Lula emphasizes the need for strategic oil reserves in response to the ongoing Middle East conflict [17]

Investment Rating - The industry investment rating is "Outperform the Market" [3] Core Insights - The report highlights that ZhongAn Online achieved a total premium of 35.735 billion yuan in 2025, representing a year-on-year increase of 6.9%. The net assets reached 25.449 billion yuan, up by 21.6%, and the net profit attributable to shareholders was 1.8 billion yuan, reflecting a significant year-on-year growth of 198.3% [1][2] - The insurance segment maintained a high-quality development strategy, with a net profit of 1.679 billion yuan, up by 185.4%. The technology segment benefited from digital transformation, contributing a net profit of 52 million yuan, while the banking segment optimized its cost-to-income ratio, resulting in a net profit of 17 million Hong Kong dollars [2] - The report indicates that the overall investment income increased by 59.1% year-on-year, driven by a recovery in the capital market, with domestic insurance assets showing annualized investment returns of 5.3% and 1.9% respectively [2] Summary by Sections Insurance Segment - Total insurance service revenue was 33.486 billion yuan, with a year-on-year increase of 5.5%. The combined underwriting cost ratio was 95.8%, down by 1.1 percentage points, with a claims ratio of 57.1% and an expense ratio of 38.7%. The underwriting profit was 1.412 billion yuan, up by 42.5% [2] Health Ecosystem - Total premium for the health ecosystem reached 12.682 billion yuan, up by 22.7%. The Zhongminbao high-end medical insurance saw rapid growth, with total premiums of 2.171 billion yuan, a year-on-year increase of 456.1%. The combined underwriting cost ratio improved to 92.1%, down by 3.6 percentage points [2] Digital Life - Total premium for the digital life segment was 15.973 billion yuan, down by 1.4%. Innovative business premiums increased by 37.2% to 6.568 billion yuan, accounting for 41.1% of the total. The combined underwriting cost ratio was 99.9%, with a claims ratio of 65.3% [2] Consumer Finance - Total premium for the consumer finance segment was 4.320 billion yuan, down by 10.6%. The underwriting balance at year-end was 22.883 billion yuan, down by 5.4%. The combined underwriting cost ratio was 97.0%, with a claims ratio of 68.2% [2] Automotive Ecosystem - Total premium for the automotive ecosystem reached 2.760 billion yuan, up by 34.6%. The focus was on high-quality business, with household vehicle premiums accounting for 87.9%. The combined underwriting cost ratio improved to 93.1%, while the claims ratio increased to 69.2% [2] Investment Recommendations - The report suggests that ZhongAn's total investment income growth validates the insurance investment elasticity. For 2026, the life insurance sector is expected to maintain robust supply and demand, with net premium income (NBV) showing steady growth. The report recommends focusing on China Life and New China Life for potential investment opportunities [2]