China Merchants Securities released a research report stating that it expects listed securities companies' non-GAAP net profit for 2025 to reach 216.7 billion yuan, a year-on-year increase of 55%. For the fourth quarter of 2025, non-GAAP net profit is projected at 54.8 billion yuan, up 26% year-on-year but down 19% quarter-on-quarter. Currently, the valuation of the brokerage sector remains undervalued and positioning levels are still low, which does not align with the sector's status as a "bellwether for bull markets" and the potential for earnings enhancement driven by a warming policy environment. Looking ahead, as indices continue to rally, significant attention should be paid to the call option characteristics of the brokerage sector, and investors are advised to maintain firm holdings.
For individual stock allocation, the report recommends Guotai Haitong (601211.SH), which still has low valuations, significant expectation gaps, and ample earnings potential. It also recommends CICC's H-shares (03908), which possess excellent cross-border wealth management capabilities under the expectation of RMB appreciation and a prominent international investment banking brand. The main views of China Merchants Securities are as follows.
A steady full-year performance is anticipated, with margin lending and investment banking supporting Q4 2025 earnings. The bank projects the full-year 2025 non-GAAP net profit for listed brokers at 216.7 billion yuan, up 55% year-on-year. For Q4 2025, non-GAAP net profit is estimated at 54.8 billion yuan, increasing 26% year-on-year but decreasing 19% quarter-on-quarter. Breaking it down by segment: 1) Brokerage and margin financing: The average daily stock and fund trading volume for 2025 is estimated at 20.5 trillion yuan, up 70% year-on-year, while the average daily margin financing balance was 20.8 trillion yuan, up 33% year-on-year. For Q4 2025, the average daily stock and fund trading volume was 24.3 trillion yuan, up 18% year-on-year but down 2% quarter-on-quarter; the average daily margin financing balance was 24.9 trillion yuan, up 40% year-on-year and 17% quarter-on-quarter. Full-year 2025 brokerage/credit business revenues are projected at 158.9 billion yuan and 50.3 billion yuan, up 50% and 43% year-on-year, respectively. Q4 2025 brokerage/credit revenues are estimated at 47.1 billion yuan and 16.4 billion yuan, up 12% and 25% year-on-year, and down 3% and up 15% quarter-on-quarter, respectively.
2) Investment Banking: In 2025, A-share IPO/refinancing (excluding the big four banks' private placements) fundraising amounts were 1,308 billion yuan and 4,177 billion yuan, up 97% and 69% year-on-year, respectively; bond underwriting totaled 271.3 trillion yuan, up 13% year-on-year. In Q4 2025, A-share IPO/refinancing fundraising reached 549 billion yuan and 1,387 billion yuan, surging 165% and increasing 9% year-on-year, and rising 44% and 13% quarter-on-quarter, respectively; bond underwriting was 56.3 trillion yuan, down 14% year-on-year and 29% quarter-on-quarter. Full-year 2025 investment banking revenue is projected at 39.0 billion yuan, up 27% year-on-year. Q4 2025 investment banking revenue is estimated at 13.8 billion yuan, up 35% year-on-year and 44% quarter-on-quarter.
3) Asset Management: By the end of 2025, the net asset value of non-monetary market funds reached 22.7 trillion yuan, increasing 18% from the beginning of the year and 3% from Q3 2025. The net asset value of ETFs was 6.02 trillion yuan, surging 61% from the start of the year and 7% from Q3 2025. ETFs accounted for 26.5% of non-monetary fund AUM, up 7.1 percentage points from the year's start and 1.0 percentage point from Q3 2025. Full-year 2025 asset management revenue is projected at 45.6 billion yuan, up 3% year-on-year. Q4 2025 asset management revenue is estimated at 12.3 billion yuan, up 6% year-on-year and 2% quarter-on-quarter.
4) Proprietary Trading: Considering the CSI Total Bond Index rose slightly by 0.6% in Q4 2025, while the three major stock indices averaged a gain of 0.3%, bond proprietary trading is expected to remain under pressure, while equity proprietary trading should maintain a stable trend. Additionally, the offshore USD/CNY exchange rate broke below 7.0 by the end of 2025, which may exert some pressure on the foreign exchange gains of listed brokers. Full-year 2025 proprietary trading revenue is projected at 234.1 billion yuan, up 35% year-on-year. Q4 2025 proprietary trading revenue is estimated at 47.2 billion yuan, up 10% year-on-year but down 37% quarter-on-quarter.
Amid the bull market sentiment, the brokerage sector's call option attributes are viewed favorably, and investors are advised to hold firmly. Trading volume has surged as the market celebrated a strong start to the year. Since the beginning of the year, the average daily trading volume of the Wind All Share Index climbed from 25.8 trillion yuan on January 5th to a record 36.4 trillion yuan on January 12th, surpassing the previous high set on October 8th, 2024. The margin financing balance gradually increased from 25.6 trillion yuan to 26.3 trillion yuan on January 9th, while margin trading volume rose from 291.5 billion yuan to 345.6 billion yuan on January 9th. Driven by strong trading enthusiasm, the Shanghai Composite Index reclaimed the 4000-point level and breached 4100 points.
Regulatory policies for the securities industry may be warming. After several years, the new president of the Securities Association of China is once again a representative from the industry, with Guotai Haitong's Chairman Zhu Jian successfully elected. Coupled with statements suggesting "appropriate 'unbinding' for high-quality institutions, further optimizing risk control indicators, and moderately relaxing capital space and leverage restrictions," this may indicate that securities industry regulation is entering a warming cycle, with the balance between functional and profitability considerations potentially being approached.
Risk warnings include intensified market volatility, a slower-than-expected economic recovery, and policy effects falling short of expectations.
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