1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The report focuses on the historical cases of subordinated debt non - redemption, analyzes the characteristics, subsequent progress, and credit risk outlook of non - redemption, aiming to help investors better understand the credit risk characteristics of subordinated debt. Since the non - redemption announcement of "22 Hongdou MTN003" by Hongdou Group in October 2025, the risk of subordinated debt non - redemption has attracted attention. The report suggests paying more attention to subordinated debt of insurance companies and industrial entities with operational pressure and weak shareholder support in the future [2][11][54]. 3. Summary According to Relevant Catalogs 3.1 Subordinated Debt Concept and Classification - Subordinated bonds are debt instruments with repayment priority after general liabilities but before common stock equity, featuring high risk and high return. As of November 10, 2025, the scale of outstanding subordinated debt was about 10.7 trillion yuan, with the financial industry accounting for about 8.5 trillion yuan [3][12]. - Most subordinated debts have a call option, and issuers usually have a strong incentive to call. The call motivation is mainly based on the interest rate jump - up mechanism and the "decreasing" nature of capital. Non - financial enterprise subordinated debts are mostly used to repay interest - bearing debts and supplement working capital, while financial institution subordinated debts are mostly used for capital replenishment [19]. - For non - perpetual subordinated debts (mainly 5 + 5), there is a "decreasing" nature of capital, and insurance companies have a stronger call motivation due to the interest rate jump - up mechanism. For perpetual subordinated debts (mainly 5 + N), most securities companies and non - financial enterprises set an interest rate jump - up mechanism [20][21]. - For non - financial enterprises, perpetual bonds are not necessarily subordinated debts. For financial enterprises, perpetual bonds are all subordinated debts. If an issuer announces non - redemption, it may indicate fundamental pressure and difficulties in rolling over subordinated debt, posing risks such as duration mismatch and investment losses for investors [25]. 3.2 Historical Case Review of Subordinated Debt Non - Redemption - As of November 10, 2025, 70 entities with 88 subordinated debts had non - redemption events, involving a bond scale of about 76.5 billion yuan. Non - redemption mainly occurred in commercial bank secondary capital bonds, concentrated in weak - qualified banks in Liaoning Province, and was common in low - rated subordinated debts [4][27][37]. - In terms of industry type, non - redemption mainly occurred in banks and insurance companies, with 74 and 7 non - redeemed bonds respectively, accounting for 84% and 8% of the total number of non - redeemed subordinated debts, and involving scales of 45.5 billion yuan and 17.6 billion yuan, accounting for 59% and 23% respectively [27]. - In terms of enterprise nature, non - redemption mainly occurred in public enterprises, but the number of non - redemption events among private enterprises has increased since 2024 [5][37]. 3.3 Subsequent Progress of Subordinated Debt Non - Redemption - After 88 subordinated debts were not redeemed, 1 bond defaulted, 1 was extended, 65 continued to exist normally, and 21 were fully redeemed at or before maturity. Only a few entities could successfully issue subordinated debt again after non - redemption, and the issuance had non - market - oriented characteristics. Some weak - qualified entities may continue to not redeem subordinated debt [6][45][49]. 3.4 Credit Risk Outlook of Subordinated Debt Non - Redemption - In the past, the risk of subordinated debt non - redemption was mainly concentrated in banks, but recently, risks of insurance companies and industrial entities have gradually emerged. In the future, when analyzing the risk of subordinated debt non - redemption, it is recommended to pay more attention to insurance companies and industrial entity subordinated debts with operational pressure and weak shareholder support [7][54].

Investment Rating - The report indicates a positive outlook for the securities industry, with expectations of steady performance and manageable operational risks [4]. Core Insights - The securities industry has seen a significant increase in market activity, leading to substantial growth in wealth management and proprietary trading revenues [4]. - The issuance of debt by securities companies has reached its highest quarterly level in recent years, with a notable increase in both the scale and number of issuances [10][11]. - Regulatory bodies are focusing on compliance and have reduced the frequency of penalties against securities firms, indicating an improvement in industry compliance [8]. Regulatory Dynamics - The regulatory environment is transitioning from rule-making to enforcement, allowing the market to adapt to existing regulations [5]. - In Q3 2025, the China Securities Regulatory Commission (CSRC) has made several adjustments to existing regulations to enhance governance and reduce compliance burdens on firms [6][7]. Debt Market Tracking - In Q3 2025, securities companies issued a total of 696 debt financing instruments, a year-on-year increase of 72.70%, with an issuance scale of 12,719.59 billion yuan, up 45.55% [10]. - The issuance of corporate bonds accounted for 54.82% of the total, with a significant year-on-year increase of 382.64% [11]. Industry Dynamics - The securities market has experienced a robust recovery in equity financing, with IPO issuance growing by 135.27% year-on-year [40]. - Mergers and acquisitions among securities firms have accelerated, enhancing capital strength but increasing competition for smaller firms [20][21]. Performance Overview - Proprietary trading revenues are expected to increase due to a rising stock market, while fixed-income products face pressure from declining interest rates [24][26]. - Wealth management business is projected to grow significantly, with trading volumes in the stock market increasing by 218.43% year-on-year [27]. - The investment banking sector is experiencing a rebound in equity financing, although challenges remain [39]. Asset Management Business - The asset management sector has seen a record number of new products launched, with a total of 410 new products issued in September 2025 [44]. - The total net asset value of managed products reached 11,390.43 billion yuan, reflecting a 9.37% increase from the beginning of the year [44].

Core Viewpoint - The surge in bond issuance by securities firms in China reflects a strong demand for capital, driven by increased market activity, expansion of capital-intensive businesses, and favorable financing conditions in a low-interest-rate environment [1][4]. Group 1: Bond Issuance Scale - As of September 28, 2023, the total bond issuance by securities firms has exceeded 1.18 trillion yuan, marking an 83.27% year-on-year increase, with 616 bonds issued compared to 366 in the same period last year [2]. - Monthly issuance saw a significant increase, with July reaching 142.99 billion yuan and August further rising to 275.5 billion yuan, setting new records for both volume and scale [2]. - Leading firms dominate the issuance, with seven firms surpassing 50 billion yuan in bond issuance, including China Galaxy, which issued over 100 billion yuan [2]. Group 2: Use of Funds - The bond issuance is characterized by a diverse allocation of funds, including debt repayment, liquidity support, and targeted investments, particularly in margin trading and derivatives [3]. - A significant portion of the funds is used for refinancing high-interest debt, optimizing debt structures, and enhancing operational capital for business expansion [3]. Group 3: Factors Driving Demand - The increase in bond issuance is attributed to multiple factors, including a strong A-share market, lower financing costs, and a supportive regulatory environment [4]. - The A-share market's performance, particularly the Shanghai Composite Index surpassing key thresholds, has led to a surge in trading activity, boosting demand for capital [4]. Group 4: Issuance Costs - The average interest rates for bond issuance have decreased compared to the previous year, with company bonds averaging 1.89%, subordinate bonds at 2.25%, and short-term financing bonds at 1.77% [5]. - Debt financing is favored over equity financing due to its larger funding capacity, lower costs in the current environment, and flexibility in meeting different business funding cycles without diluting equity [5]. Group 5: Future Outlook - The demand for capital among securities firms is expected to remain strong, with projections indicating continued high bond issuance in the fourth quarter [6]. - Leading firms are likely to strengthen their competitive positions due to capital and cost advantages, potentially intensifying the "Matthew Effect" in the industry [6].

Core Viewpoint - The A-share market is experiencing a favorable trend, leading to a surge in bond issuance by securities firms to replenish capital needs [1][2]. Group 1: Bond Issuance Trends - In August, securities firms issued a total of 141 bonds, raising 293.5 billion yuan, marking a peak for the year [2][3]. - As of September 12, 2023, the total bond issuance by securities firms for the year reached 1.06 trillion yuan, a significant increase from 673.6 billion yuan in the same period last year [3][4]. - Six securities firms have issued over 50 billion yuan in bonds this year, with Galaxy Securities leading at 102.5 billion yuan [4]. Group 2: Market Conditions and Financing Needs - The surge in bond issuance is attributed to active market trading, low interest rates, and regulatory encouragement, alongside the firms' business development and debt structure adjustment needs [2][5]. - The A-share market has seen significant increases in the Shanghai Composite Index, which has crossed several key thresholds, enhancing trading activity [5][6]. Group 3: Use of Raised Funds - The primary purposes for the raised funds include refinancing existing debts at lower costs and supplementing operational capital to support business expansion [5][6]. - Analysts indicate that the shift in the securities industry towards capital-driven growth necessitates increased capital reserves through bond issuance [5][6]. Group 4: Margin Financing and Competitive Landscape - The balance of margin financing has exceeded 2 trillion yuan, indicating a growing demand for leveraged funds among high-net-worth clients [7]. - The average bond issuance interest rate for securities firms this year is 1.89%, with larger firms enjoying lower rates, enhancing their competitive edge in margin financing [7][8]. - Some smaller firms face higher financing costs, which may pressure them in the competitive landscape of margin financing [8].