中国券商：牛市是否会持续，评估中国券商的上行空间-China Brokers_ Will Bull Market Continue_ Assessing Upside for China Brokers

Summary of China Brokers Conference Call Industry Overview - The report focuses on the China brokerage industry, particularly the performance and outlook of covered brokers amid a potential bull market in A-shares [1][2][7]. Key Insights and Arguments 1. Market Outlook: - Despite a recent rally, there is still significant upside potential for covered brokers, with a projected average upside of 25% to 53% depending on market scenarios [1][2][7]. - The A-share market is considered to be in the early stages of a bull market, with retail investor engagement expected to increase [2][22][23]. 2. Trading Activity and Forecasts: - The Average Daily Trading (ADT) forecast for 2025, 2026, and 2027 has been revised upwards by 10% to 17%, now estimated at RMB 1.65 trillion, RMB 1.90 trillion, and RMB 2.1 trillion respectively [1][7]. - The household asset reallocation towards equities is expected to support trading activity, with a potential RMB 6.8 trillion buying flow into the A-share market for every 1 percentage point increase in household equity allocation [1][7]. 3. Broker Performance: - In Q2 2025, seven covered brokers reported revenue and NPAT growth of 31% and 38% year-on-year, respectively, driven by proprietary trading and investment banking business [8]. - CICC showed the strongest earnings growth at 131.3% year-on-year, while CGS had the slowest at 26.0% [8]. 4. Regulatory Environment: - Ongoing regulatory efforts aim to create a "wealth effect" through the stock market to boost domestic consumption, with potential interventions to manage market overheating [3][7]. - Recent regulatory changes, including a 20% capital gains tax on overseas investments, are expected to drive household asset reallocation towards equities [1][7]. 5. Investment Banking and Equity Raising: - Onshore equity raising activities have increased significantly, with a 92% half-year growth in 1H25, although still low compared to historical standards [39]. - The equity raising amount as a percentage of free float market cap remains low at 0.3% in 1H25, indicating room for growth [39]. 6. Margin Financing: - The margin finance balance has reached a 10-year high of RMB 2.2 trillion, but remains low as a percentage of A-share free float market cap at 2.5% [33][39]. Additional Important Points - Household Deposits: The household deposit to market cap ratio is at a multi-year high of 1.9x as of July 2025, indicating potential for further asset reallocation [1][7]. - Prop Trading: Prop trading revenue for covered brokers increased by 20.3% quarter-on-quarter and 45.5% year-on-year in Q2 2025, contributing significantly to overall revenue [14]. - Future Expectations: Analysts expect brokers to benefit from a surge in ADT to RMB 1.93 trillion in Q3 2025, which would represent a 56.5% quarter-on-quarter increase [8]. This summary encapsulates the key points from the conference call regarding the China brokerage industry, highlighting the optimistic outlook, performance metrics, and regulatory context that could influence future growth.