CITIC SEC released a research report stating that despite recent regulatory measures to moderately cool the market and prevent short-term overheating risks, overall trading and investment activity in the equity market remains at historically high levels. Core indicators such as average daily trading volume and margin financing balances continue to outperform long-term averages, suggesting securities companies are poised to benefit persistently, with fundamentals expected to maintain high profit elasticity into 2025.
Looking ahead, with the optimization of equity financing pace, a rebound in M&A activity, the expansion of derivative instruments, and the deepening transformation of wealth management, capital market functionality is gradually recovering and improving. The business boundaries of securities firms will continue to widen, leading to more diversified and stable revenue streams, alongside potential improvements in operational quality and valuation benchmarks.
As of January 14, 2026, the Securities III (CITIC) Index PB (LF) valuation stands at approximately 1.5x, at the 43rd percentile since 2016, while the Chinese Brokerage (H-Share) Index PB (LF) valuation is about 0.9x, at the 70th percentile since 2016. The report recommends actively increasing allocations.
The adjustment of the minimum margin requirement for financing transactions is a routine regulatory action to convey policy stance, prevent systemic risks, and protect investor interests. Raising the minimum financing margin requirement aims to curb market overheating, while lowering it seeks to boost market sentiment; adjustments for short selling requirements work in the opposite manner.
Beyond this, the financing margin ratio has undergone two previous adjustments, one increase and one decrease, with market reactions aligning with expectations. Currently, trading and investment activity is at historically high levels, and the timing of the regulatory announcement is considered proactive.
According to Wind data, from the start of 2026 to January 13, over just seven trading days, the margin financing and short selling balance increased by 5.60% compared to the end of the previous year. The Shanghai Composite Index rose 4.28% during the same period to 4,139 points, hitting a near-decade high.
The counter-cyclical adjustment is initiated based on statutory arrangements to foster the long-term stable development of the equity market. The moderate increase of the financing margin ratio from 80% back to 100% corresponds to a reduction in leverage from 1.25 to 1.00.
The regulatory determination to nurture the stable development of the capital market is firm, with diverse methods and increasingly mature mechanisms. Current regulatory measures clearly aim to "stabilize expectations, prevent risks, and promote reform," safeguarding against systemic financial risks during market fluctuations.
From a medium-term perspective, alongside sustained improvement in the secondary market, the pace of equity financing is expected to be moderately adjusted, and various market-based tools are likely to be gradually relaxed. This will collectively enhance the market's self-regulating capacity, solidify price discovery and resource allocation functions, and better realize the capital market's fundamental role.
Long-term, underpinned by the major trend of household asset allocation shifting from real estate and deposits to diversified financial assets, the equity market, as a key vehicle for wealth redistribution, will see continuous improvements in its institutional foundation, liquidity, and attractiveness. The A-share market is expected to exhibit a "slow bull" pattern: a steady upward trajectory characterized by structural optimization and functional perfection.
Risk factors include an unexpected decline in stock and fund trading volumes; tighter-than-expected IPO and refinancing policies; unexpected fluctuations in market interest rates; inadequate execution of company strategies; exposure to customer credit risk; and slower-than-expected progress in capital market reforms.
Despite recent regulatory efforts to moderately guide the market towards cooling off and prevent short-term overheating risks, overall trading activity in the equity market remains at historically elevated levels. Key metrics like average daily trading value and margin trading balances are above their long-term averages, positioning securities companies for continued benefits, with fundamentals likely to extend the high profit elasticity seen in 2025.
Prospects are bolstered by optimized equity financing rhythms, revived M&A activity, expanded derivative tools, and a deepening wealth management transformation. These factors are gradually restoring and perfecting capital market functionality, which will persistently broaden securities firms' business scope, diversify and stabilize revenue, and enhance potential for improved operational quality and valuation benchmarks.
As of January 14, 2026, the Securities III (CITIC) Index PB (LF) is valued at approximately 1.5x, sitting at the 43rd percentile since 2016. The Chinese Brokerage (H-Share) Index PB (LF) trades around 0.9x, at the 70th percentile since 2016, suggesting an attractive opportunity for active allocation increases.
At the individual stock level, the report recommends two main themes: 1) Large and medium-sized securities companies with extensive client bases, prominent scale advantages, strong comprehensive service capabilities, and characteristics of both alpha and beta returns; 2) Small and medium-sized securities firms where high-beta attribute revenue constitutes a significant portion of total income.
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