CITIC SECURITIES has released a research report stating that high market trading activity and regulatory easing in investment banking and derivatives are the core drivers for performance improvement in the securities industry this year. Currently, the price-to-book (PB) and price-to-earnings (PE) ratios of the brokerage sector are below the 20th percentile of the past decade, indicating a high margin of safety for allocation. Sustained activity in fundamentals, policies, and thematic catalysts are expected to be key factors driving a valuation recovery. It is recommended to position based on high certainty of earnings growth and long-term improvements in industry competition dynamics. Leveraging synergies from mergers and acquisitions and enhanced capital utilization efficiency from leverage expansion, large and medium-sized institutions in the sector are poised to continuously improve shareholder returns and gain market share. The report recommends leading securities companies and mid-sized brokers. The main views of CITIC SECURITIES are as follows:
Active markets provide a stable foundation for earnings growth, while regulatory changes bring long-term marginal improvements. According to Wind data, the average daily stock trading volume in the capital market reached 2.58 trillion yuan in the first quarter of 2026, up 30.8% quarter-on-quarter and 69.7% year-on-year, significantly higher than the 2025 daily average of 1.73 trillion yuan. Highly active market trading will continue to boost brokerage revenue and stabilize the foundation for industry earnings growth. Under the macro guidance of the 15th Five-Year Plan, which emphasizes "actively developing equity and bond direct financing, and steadily developing futures, derivatives, and asset securitization businesses," regulatory reforms in investment banking and derivatives businesses will bring further marginal improvements to industry performance. According to Wind, the scale of equity financing in the A-share market reached 253.8 billion yuan in the first quarter of 2026, up 36.2% quarter-on-quarter and 64.0% year-on-year. In the macroeconomic environment where the Two Sessions confirmed an acceleration of IPOs for consumer companies and refinancing for tech firms, investment banking development remains optimistic for 2026. In derivatives, the "Measures for the Supervision of Derivatives Trading (Trial) (Draft for Comment)" issued in January 2026 proposed "maintaining reasonable leverage levels and market scale in the derivatives market," which is expected to break the rigid restrictions on over-the-counter derivatives scale since November 2023, opening up space for client-demand-driven leverage increases and investment return growth. With this support, the securities industry's profit growth rate year-on-year in the first quarter of 2026 is expected to exceed 30%.
Investment pressure points are continuously being resolved, and the sector's bottom is gradually solidifying. As of April 10, 2026, the non-bank financial sector has seen significant declines since the start of the year, falling by 11.69 percentage points, ranking last among all sectors. Shareholder reductions by major holders, dilution risks from refinancing, and regulatory risks are the core reasons for the significant decline in sector returns. However, with the capital market stabilizing around 4000 points and brokerage sector PB and PE valuations below the 20th percentile of the past decade, further pressure on market capitalization and the likelihood of industry refinancing have decreased. From a regulatory perspective, unlike previous cycles of major shifts, this round of capital market reforms continues to focus on counter-cyclical and refined adjustments. It is expected that supervision of illegal activities will be strictly implemented, while positive support is anticipated for businesses such as derivatives, investment banking, and buyer-side investment advisory. Looking ahead to mid-year, the brokerage sector is expected to experience a period of positive resonance in fundamentals, policies, and thematic catalysts. Against the macroeconomic backdrop of a steadily improving capital market, market activity is likely to remain high, setting favorable expectations for the securities industry's interim reports. It is projected that the securities industry's profit growth in the first half of 2026 will still exceed 30% year-on-year. On the policy front, according to the China Securities Regulatory Commission's 2026 legislative work plan, policies in areas such as refinancing and derivatives have been included as "key projects targeted for implementation within the year," with gradual implementation expected around mid-year. Meanwhile, industry mergers and acquisitions, as an important theme continuously driving sector investment sentiment, will see further short-term implementation of mergers within the Central Huijin system, while mergers involving state-owned assets under the State-owned Assets Supervision and Administration Commission and local state-owned systems are expected to gain momentum within the year.
Risk factors include a decline in market trading volume, tightening of equity financing, losses in investment businesses, and exposure of credit business risks.
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