According to Guotai Haitong's non-bank financial team led by Liu Xinqi, the brokerage sector saw increased allocations, with public fund holdings (excluding passive index funds) rising from 0.85% to 1.08%, though the sector remains under-allocated by 2.30 percentage points. The insurance sector's allocation ratio increased from 1.03% to 2.13%, remaining under-allocated by 0.33%, while the insurance index surged 23.42% in the fourth quarter. Although holdings in the non-bank financial sector improved in Q4, the sector is still in an under-allocated state, with an overall under-allocation of 3.08 percentage points. Guotai Haitong is optimistic about the opportunities for non-bank financial stocks with improving profitability and low valuations, driven by household fund inflows against the backdrop of a lower interest rate environment. Guotai Haitong's main views are as follows:
Market gains in the fourth quarter prompted institutional investors to increase allocations to the brokerage sector. Public fund holdings (excluding passive index funds) in the sector rose from 0.85% to 1.08%, yet the sector remains under-allocated by 2.30 percentage points. The Wind All Share Index climbed 0.97% in Q4, with average daily stock and fund trading volume reaching 2.45 trillion yuan, down 3% quarter-on-quarter but still at a high level. Active market trading drove increased fund allocations to brokerages. On an individual stock basis, the holding value ratio of CITIC Securities increased from 0.1687% to 0.3132%, while that of Huatai Securities rose from 0.1579% to 0.1989%. As households gradually rebalance their balance sheets, the certainty of increased equity asset allocations is growing. It is recommended to focus on specialized brokerages with potential gains in retail business market share, those holding stakes in leading public fund companies, or those with significant profit contributions.
The insurance sector saw a substantial increase in allocation ratios, highlighting the investment opportunities driven by allocation forces. The sector's allocation ratio climbed from 1.03% to 2.13%, remaining under-allocated by 0.33%, while the insurance index jumped 23.42% in Q4. For individual stocks, China Life Insurance's holding value ratio increased from 0.019% to 0.020%, while Ping An Insurance and China Pacific Insurance were over-allocated. Specifically, Ping An's holding value ratio rose from 0.68% to 1.449%, and China Pacific Insurance's ratio increased from 0.22% to 0.422. Based on expectations of continued fund inflows into the market and a preference for undervalued stocks, coupled with stabilizing interest rates and the deepening transformation of insurers' liability structures, the team continues to recommend insurance stocks.
Allocation ratios in the diversified financials and fintech sector declined in the fourth quarter, yet fintech-related stocks are worth watching. Public fund holdings (excluding passive index funds) in the sector dropped from 0.204% to 0.145%. Among individual stocks, Lakala and Yuexiu Financial Holdings saw increased allocations, with their holding value ratios rising from 0% to 0.0027% and from 0% to 0.0025%, respectively. With the continuous implementation of policies encouraging incremental fund inflows, the expansion of digital yuan application scenarios, the rollout of AI products in finance, and an increase in IPOs for sci-tech innovation companies, the team remains positive on investment opportunities in financial information services, third-party payment providers, and equity investment firms.
Investment recommendations: The non-bank financial sector remains under-allocated, with an overall under-allocation of 3.08 percentage points. As medium- to long-term incremental funds accelerate their entry into the market, four types of investment opportunities are favored: 1) Wealth management themes driven by household fund inflows, offering opportunities in fintech and brokerages; 2) Valuation recovery opportunities in the insurance sector expected by early 2026, supported by stabilizing interest rates; 3) Profit enhancement opportunities for third-party payment companies due to the expansion of digital yuan usage scenarios; 4) Broader exit channels for equity investment institutions amid an increase in IPOs for sci-tech innovation companies. Risk warnings: Significant volatility in the equity market; slower-than-expected allocation to equity assets by households; and slower-than-anticipated alleviation of concerns over life insurers' interest spread losses.
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