China Brokers Sector: Sector catchup on multiple tailwinds

Research evidence excerpt

China Brokers Sector: Sector catchup on multiple tailwinds

ce reached Rmb96 bn, up 1.8x YoY, while new trading account

openings hit 5.3mn in April-May, up 51% YoY. The CSI300 index rebounded 13.7% in

Q2-to-date, reversing a 3.9% decline in Q1, a tailwind for brokers' investment

portfolios. Leading brokers are well-placed to benefit from STAR market exposure,

leveraging their integrated IB, research and investment capabilities via follow-on

investment commitments and private equity holdings.

Lujiazui Forum recap: market stability, tech narrative, and further opening-up

Lujiazui Forum struck a market-stabilization tone. Moves to attract long-term capital and

broaden financial instruments (incl. active ETFs) should strengthen market structure,

underpin trading volume and asset allocation flows, and facilitate a slow-bull market.

Brokers would benefit across wealth management, brokerage and institutional

businesses. On equity financing, regulators signalled more inclusive listing standards at

STAR and ChiNext markets, with a focus on AI (STAR 5th Listing Criterion) and deep-tech

sectors. Expanded support for M&A, refinancing, and onshore listings of eligible HK-

listed companies should boost deal flow and lift investment banking revenues. On cross-

border, regulators are advancing RMB FX futures pilots and backing HK's launch of 5-

year RMB treasury futures, while directing flows through Stock Connect, QDII, and

Cross-border WM Connect.

Stock call: CICC (H), CITICS (A/H), HTSC (A/H) and GTHT (A)

We see a re-rating opportunity in the sector, underpinned by likely strong Q2 results and

easing selling pressure. Despite the recent rally, YTD China brokerages (H) and (A) were

down 0.4% and 6.8% respectively, against the Hang Seng Index down 7.3% with the

CSI300 index up 9.3%.