A recent industry review from China Securities Co., Ltd. highlights a period of exceptional profit growth for brokerages in the first half of 2026, fueled by heightened market activity. Proprietary trading emerged as the single largest revenue contributor, accounting for nearly half of total income, while brokerage commissions were boosted by a surge in equity trading volume. Margin financing balances also crossed the significant 3 trillion yuan threshold.
The report notes that performance disparities among firms were primarily driven by differences in proprietary trading flexibility, leverage and return on equity, and wealth management capabilities. Looking ahead, the industry is witnessing three key trends: investment operations are evolving to combine market-driven beta with venture capital-style equity investments in tech firms, which could offer a more sustainable income stream; resources are increasingly concentrating among top-tier players, accelerating merger and acquisition activity; and wealth management is shifting towards a model that emphasizes client concessions and structural adjustments. This juxtaposition of robust profit growth with declining valuations suggests that the quality and long-term sustainability of this expansion warrant closer inspection.
Key Finding 1: Trading Activity Drove Profit Growth, With Proprietary Operations Leading
The first conclusion is that the surge in profits for the first half of 2026 was largely a market beta phenomenon, with proprietary trading and brokerage services providing the main support, while the underlying business structure showed relatively limited change. Proprietary investment contributed the most to profit growth, with the 39 listed brokerages generating 164.95 billion yuan in investment income, a 51.9% year-on-year increase, representing 46.41% of total revenue. This share, up 2.1 percentage points from the same period last year, marked the highest proportion among all business lines.
The active trading environment also significantly boosted brokerage and margin lending operations. The cumulative turnover of Shanghai and Shenzhen stock and fund trading reached 376.16 trillion yuan, a year-on-year surge of 136.30%, with an average daily turnover of 3.24 trillion yuan. Margin financing balances climbed 18.88% from the start of the year to a record-breaking 3.02 trillion yuan. Correspondingly, brokerage revenue increased by 54.2% to 95.47 billion yuan, and net interest income grew by 50.3% to 29.48 billion yuan, both reaching multi-year highs for a first-half period.
Other business segments also showed improvement, albeit on a smaller scale. Asset management revenue rose by 29.8% to 27.19 billion yuan, while investment banking income increased by 26.3% to 18.53 billion yuan. While these areas grew in tandem with proprietary trading and brokerage, their smaller revenue bases meant their contribution to the overall profit increase was more moderate.
Key Finding 2: Performance Divergence Driven by Three Factors
Despite the broad rally, the second conclusion points to performance dispersion among brokerages, influenced primarily by three factors: proprietary trading flexibility, leverage and ROE levels, and wealth management strength. Smaller and mid-sized brokerages, benefiting from a lower base and higher operational flexibility, have shown faster growth rates during this period.
The correlation between proprietary trading flexibility and profit growth is strong. For instance, China Merchants Securities saw its proprietary investment income jump by 213.2%, Guotai Haitong by 155.0%, and GF Securities by 141.1%. This translated into net profit attributable to parent company growth of 104.9% for China Merchants Securities, 89.3% for CICC, and 80.1% for GF Securities, all significantly outpacing the sector average of 45.1%. Brokerages with more aggressive proprietary positions and a heavier equity allocation have demonstrated greater upside flexibility.
ROE and leverage levels also differentiate earnings quality. While leading firms like China Merchants Securities, GF Securities, and CITIC Securities posted ROEs of 15.0%, 14.0%, and 13.9% respectively, smaller players such as Hua'an Securities (16.4%) and Changjiang Securities (15.1%) recorded higher figures. The average equity multiplier stood at 3.72x, with CICC (6.05x) and Shenwan Hongyuan (5.79x) leading. This combination of higher leverage and a lower base has enabled smaller brokerages like Zhongtai Securities (146.4% growth), Caida Securities (104.6%), and Hua'an Securities (102.5%) to post rapid profit increases.
Wealth management capability serves as another differentiator for brokerage business. Among the top ten brokerages by brokerage income, Western Securities (84.4% growth), Guotai Haitong (73.4%), and GF Securities (67.2%) stood out, suggesting that a strong customer base and distribution channels provide significant support to brokerage revenue growth.
Key Finding 3: Industry Transitioning Towards a Dual-Track Investment Model
The third conclusion highlights that the brokerage industry is in a transitional phase, increasingly reliant on investment business, which is itself bifurcating into market-driven beta and venture capital-style equity investments. This is occurring alongside the concentration of resources among top players and adjustments in the wealth management sector, leading to a scenario where high profit growth coexists with valuation downgrades.
The internal evolution of the investment business is becoming apparent, with equity investments in tech ventures potentially offering a new revenue source. This business segment now accounts for 46.41% of revenue, a figure that continues to rise. However, its composition is not limited to secondary market trading. In the first half of the year, several brokerages reported significant gains from equity investments in technology companies, with notable contributions from semiconductor and storage-related enterprises. These returns stem from various investment avenues, including direct investment, alternative investment, STAR Market follow-on investments, and private equity fund contributions. If these investments continue to yield returns through IPOs or mergers, they could become a more sustainable source of income compared to the more transient gains from secondary market trading.
Industry resources are also consolidating towards top-tier firms, accelerating merger activity. IPO pipelines are concentrated at the leading brokerages, with CITIC Securities, Guotai Haitong, China Securities Co., Ltd., and CICC holding 58, 56, 41, and 33 projects, respectively. Stricter regulation is likely to further entrench the advantages of these compliant leaders. Notable integrations, such as CICC's absorption of Dongxing Securities and Xinda Securities, and Orient Securities' acquisition of Shanghai Securities, are reshaping the industry landscape.
The wealth management segment is entering a phase focused on fee concessions and structural adjustments. Public fund fee reforms are promoting high-quality industry development, with a potential shift in focus from scale expansion to value creation. Within the ETF market, there is a clear dichotomy: broad-based indices have seen significant net redemptions, while industry, thematic, strategy, and style products have grown against the trend.
Section 1: Sharp Profit Increase Contrasts With Weaker Sector Performance
The first half of 2026 was marked by exceptionally strong trading activity in the A-share market, with profit growth slightly exceeding expectations. The cumulative turnover for stocks and funds in Shanghai and Shenzhen was 376.16 trillion yuan, a year-on-year increase of 136.30%, with average daily turnover at 3.24 trillion yuan, up 138.33%. New fund issuance showed a divided structure, with total new fund shares at 621.068 billion, up 17.65% year-on-year. However, new equity fund issuance saw a significant decline.
The 39 listed brokerages collectively generated 355.42 billion yuan in revenue, a 49.9% increase year-on-year, and 152.02 billion yuan in net profit attributable to shareholders, up 45.1%. All major business lines—brokerage, investment banking, asset management, investment, and net interest income—saw growth. Proprietary trading and brokerage were the primary revenue drivers, with growth rates of 51.9% and 54.2% respectively.
Revenue rankings at the top remained stable, with CITIC Securities, Guotai Haitong, and GF Securities leading with revenues of 49.69 billion, 47.16 billion, and 26.88 billion yuan, up 50.4%, 97.6%, and 74.6% year-on-year. China Merchants Securities, Guotai Haitong, and GF Securities were among the fastest-growing large caps, while Zhongtai Securities, Caida Securities, and Hua'an Securities showed the most flexibility among smaller firms.
The sector's total assets expanded significantly to 17.74 trillion yuan, an 18.4% increase from the start of the year, while net assets grew by a more modest 5.8% to 2.88 trillion yuan. The average annualized ROE for listed brokerages improved to 9.08%, up 2.22 percentage points. This was partly driven by increased leverage, with the average equity multiplier (excluding client funds) rising to 3.72x. CICC, Shenwan Hongyuan, and Zheshang Securities had some of the highest leverage multiples.
Despite the strong earnings performance, the brokerage sector's stock performance was notably weak, with the sector index falling 35.16% in the first half of 2026. This underperformance is attributed to extreme capital concentration in growth sectors like AI and semiconductors, which diverted funds away from beta-type sectors like brokerages. Additionally, despite current profit improvements, the market expressed skepticism about the sustainability of earnings, leading to valuation downgrades and a phenomenon of "improved performance, decreased valuation."
Regulatory Overview: Reforms Aimed at Market Optimization
In the first half of 2026, regulators introduced a series of policies focused on risk prevention, robust oversight, and high-quality development. These covered public and private funds, trading supervision, derivatives, investor protection, and financial openness. A key measure was the implementation of regulations on fund sales fees, which is expected to save investors approximately 30 billion yuan annually, contributing to a total annual industry-wide concession of over 50 billion yuan to investors. New rules also standardized fund performance benchmarks and enhanced the regulatory framework for private funds with a new supervision and disclosure measure, as well as a State Council-level guideline for the sector's high-quality growth. Regulations on short-swing trading were clarified, with differentiated arrangements for long-term funds like public funds, social security, and pension funds to lower their compliance costs and encourage market participation. A new measure for derivatives trading supervision was also implemented to unify oversight and manage cross-market risk. Reforms to the ChiNext board were announced to better serve new quality productive forces, and a joint action plan was launched to crack down on illegal cross-border financial activities.
Section 2: All Business Lines Show Growth
Brokerage Business: This was a major source of profit growth, with a 54.2% year-on-year increase. Guotai Haitong, CITIC Securities, and GF Securities led in revenue. Growth was particularly strong for Western Securities, Guotai Haitong, and GF Securities, highlighting the advantage of robust wealth management franchises. While new fund issuance focused on hard-tech growth and HK Connect themes, the issuance of new equity funds declined.
Investment Banking: Income from this segment rose by 26.3%, driven by a faster IPO approval pace, with IPO funds raised up 88.93% year-on-year. However, refinancing activity fell sharply. CITIC Securities, CICC, and Guotai Haitong led in revenue, and the IPO pipeline is also concentrated among these and a few other top firms.
Asset Management: Revenue in this segment increased by 29.8%. The scale of broker-managed assets grew by 16.63% year-on-year. In the public fund space, broker-affiliated fund managers expanded their market share to 60.6% of the total industry by the end of Q2 2026, with non-money market fund scale growing. Leading firms like E Fund, ChinaAMC, and GF Fund continued to dominate.
Investment Business: This segment, which includes proprietary trading and equity investments, was the key driver of the sector's performance, growing by 51.9%. CITIC Securities, Guotai Haitong, and GF Securities had the largest investment incomes. The scale of financial investment assets grew 11.2% from the start of the year to 7.55 trillion yuan, with trading assets seeing the biggest increase.
Net Interest Income: This line item grew by 50.3%, largely due to record-high margin financing balances, which surpassed 3 trillion yuan for the first time. Guotai Haitong and China Galaxy were among the leaders in this area.
Section 3: Valuation Analysis
The valuation of the securities sector has been significantly de-rated. As of August 28, 2026, the sector's price-to-book (PB) ratio stood at 1.17x, placing it in the 30th, 24th, and 13th percentiles over the past 3, 5, and 10 years, respectively. This is well below historical median levels and is more than 40% below its peak from November 2024.
The forward price-to-earnings (PE) valuation is also notably low. The sector's dynamic PE was 12.29x, firmly in the lower percentiles for all timeframes considered. The trailing twelve-month (TTM) PE of 15.45x also sits at historically low levels, far below its 3-year, 5-year, and 10-year medians. This indicates that while earnings have surged, the market is pricing in concerns about their sustainability, keeping valuation multiples compressed.
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