China Galaxy Securities Co., Ltd. has released a research report stating that the current valuation of the securities sector is at a historical low, with a severe short-term mismatch between fundamentals and market style. Positive factors such as future market style shifts, the implementation of policies exceeding expectations, and major industry mergers and acquisitions are all expected to become core catalysts for a sector valuation recovery. The fundamental trend of the securities industry in the second half of the year remains robust and positive, with new growth drivers continuing to emerge. Non-directional business is a crucial area for leading brokerages to establish a competitive edge.
First Half 2026 Review: Overall Performance Lags Behind the Broader Market, Valuation and Fundamentals Mismatched
From the beginning of 2026 to date (as of June 18th), the securities sector has declined by 13.85%, underperforming the CSI 300 Index by 20.58 percentage points. In Q1 2026, the performance of securities firms maintained steady growth. The 42 A-share listed brokerages collectively achieved operating revenue of 1511.3 billion yuan, a year-on-year increase of 31.4%; net profit attributable to shareholders reached 608.5 billion yuan, a year-on-year increase of 16.5%. The report suggests that the securities sector's valuation is currently at a historical low, with a significant short-term disconnect between fundamentals and market style. Future catalysts such as market style rotation, policy implementation exceeding expectations, and major industry consolidation could drive a sector re-rating.
Second Half 2026 Outlook: Strong Positive Policy Environment and Internal Business Model Evolution Foster New Engines
From a policy perspective, first, monetary policy in the second half of 2026 is expected to maintain an appropriately accommodative stance, with tools such as interest rate cuts, reserve requirement ratio cuts, and open market operations anticipated, supporting reasonably ample market liquidity. Second, the proposals for the 15th Five-Year Plan dedicate significant attention to the capital markets, indicating that deepening reforms will remain a key focus. This is expected to optimize the operating environment for the securities industry by enhancing market stability, expanding funding sources, and stimulating market participant vitality. Third, within the context of policies to build first-class investment banks, further promoting the deepening reform of financial institutions and strengthening resource integration is an industry trend. Leading brokerages and specialized boutique firms represent two core development models, fostering an industry landscape characterized by differentiated strengths and competition.
From a business segment perspective, the fundamental trend of the securities industry in the second half of the year remains robust and positive, with new growth drivers continuing to develop. For brokerage and credit businesses, market trading activity is expected to remain at high levels, supporting the core revenue base. Simultaneously, the accelerated transformation towards wealth management is creating new performance increments. In investment banking, the continued recovery of A-share and Hong Kong IPO markets is driving a rebound in related business. Leading brokerages, leveraging their market reputation and professional capabilities, are poised to gain a stronger competitive edge, potentially amplifying the 'Matthew Effect'. For proprietary trading, market volatility is intensifying amid structural trends. Investment research capabilities, diversification of strategies, and risk management will be key differentiators for performance, likely leading to more pronounced divergence in proprietary trading results in the latter half of the year. Non-directional business remains crucial for brokerages to navigate market cycles and sustain growth, representing a key battleground for leading firms to establish superiority.
Risk Warnings
Risks include macroeconomic performance falling short of expectations, capital market reforms not meeting anticipated progress, and volatility in capital markets.
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