GF Securities has released a research report noting that Hong Kong capital market reforms are continuing to improve across three dimensions — post-listing regulation, listing regime, and settlement mechanisms — with HKEX planning to advance T+1 settlement in the second half of 2028. Over the medium to long term, the downward trajectory of liability costs has been established, the logic of improving the interest-expense spread continues to strengthen, and the allocation value of the insurance sector is increasingly prominent. In the short term, sentiment is weighed down by third-quarter earnings expectations, but current low valuations combined with low institutional holdings provide room for valuation recovery, and allocation opportunities in the brokerage and insurance sectors are worth watching. The main views of GF Securities are as follows:
Securities: Hong Kong Capital Market Reforms Continue, with Multi-Dimensional Optimization in Post-Listing Regulation, Listing Regime, and Settlement Mechanisms
This week, the average daily turnover of the Shanghai and Shenzhen stock markets was 1.58 trillion yuan (down 12.7% week-on-week), and the margin financing and securities lending balance across the two markets stood at 2.50 trillion yuan (down 2.8% week-on-week). On the policy front, on October 12, the Hong Kong Securities and Futures Commission published consultation conclusions on amendments to the Securities and Futures (Stock Market Listing) Rules, proposing to allow conditions that can continue to apply after listing to be imposed on listing applicants, and to impose post-listing conditions on listed issuers as an alternative to immediate trading suspension, while simplifying the procedure for resuming trading. The relevant amendments are expected to take effect in the first quarter of 2027. In addition, HKEX published the consultation paper for the second phase of its listing regime competitiveness review on September 21, proposing to optimize rules related to discloseable transactions, connected transactions, and spin-off listings, with the consultation period ending on November 30; on October 16, HKEX further announced the consultation conclusions and implementation roadmap for shortening the settlement cycle in the Hong Kong stock cash market, targeting the advancement of T+1 settlement in the second half of 2028. These measures are expected to enhance the flexibility of the listing regime, improve post-listing regulation, and drive the upgrading of market settlement infrastructure. The related changes may affect brokerages' IPO and listed company services, financial advisory businesses, as well as brokerage clearing systems and operational processes. It is recommended to watch CITIC Securities (AH), China Merchants Securities (AH), CICC (H), Huatai Securities (AH), Guotai Haitong (AH), Caitong Securities, and Orient Securities, among others.
Insurance: Market Correction Continues, and with the Third-Quarter Earnings Window Approaching, Insurers' Short-Term Results May Face Pressure from Market Volatility; Allocation Opportunities in the Sector Are Worth Watching as Earnings Pressure Is Released
According to iFind data, as of October 16, the CITIC II Insurance Index fell 2.94% for the week, outperforming the CSI 300 Index (which fell 3.40% for the week). This week, sectors represented by technology continued to correct, and the insurance sector came under short-term pressure due to factors including third-quarter earnings expectations. Considering the sector's current low valuation and prominent defensive attributes, combined with institutional holdings still at low levels, the sector is expected to have some room for valuation recovery amid continued market volatility, and sector opportunities are worth watching. On the policy front, regulators recently issued a notice to life insurance companies regarding the investigation and rectification of "quick-return" products, mainly targeting the "long-term policy, short-term operation" risk of products such as "pay 3 years, insure for 6 years." The notice requires that, in principle, no new products with cash value at the end of the third policy year exceeding premiums paid may be filed, and existing similar products should in principle be proactively discontinued, curbing hidden risks such as deliberately suppressing expense assumptions, inconsistent reporting and execution, and expense spread losses. The industry is currently at a critical juncture in preparation for the 2027 "good start" campaign. To cool down scale-chasing behavior marketed on the basis of short-term premium recovery, channels are expected to shift from a scale-oriented approach toward long-term regular premium products, participating insurance, and protection-type products. Looking ahead, with the third-quarter earnings disclosure window approaching, and considering the overall correction in the equity market during the third quarter, insurers' investment income may be somewhat dragged down, and profit performance may come under pressure. However, the release of earnings pressure may instead provide a better allocation entry point for the sector — the market's cautious expectations for third-quarter earnings have already been priced in during the pre-holiday adjustment, and after the negative factors materialize, the sector's low valuation will further highlight its margin of safety. In addition, on the liability side, listed insurers are expected to successively launch their "good start" campaigns. Against the backdrop of deposit rates remaining at low levels and household savings migrating toward long-term savings-type products such as participating insurance, new policy sales are expected to provide sustained catalysts for the sector. Over the medium to long term, the downward trajectory of liability costs has been established, the logic of improving the interest-expense spread continues to strengthen, and the sector's allocation value is increasingly prominent. The sector's current valuation remains at a low level. For individual stocks, it is recommended to watch: China Life Insurance (AH), Ping An Insurance (AH), New China Life Insurance (AH), PICC Property and Casualty (H), China Taiping (H), People's Insurance Company of China (A) / PICC Group (H), and China Pacific Insurance (AH).
Risk Warnings: Significant volatility in the capital markets, intensifying industry competition, changes in industry policies, and other factors.
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