CITIC Securities: Listed brokerage's performance remains steady and improving, with ongoing optimization of business structure

CITIC CICC released a research report saying that the operating performance of listed securities firms in 2025 is showing a steady and favorable trend, with business structure continuously optimized and the advantages of leading firms in an all-around business setup further strengthened. As the value of insurance allocations becomes evident, it recommends focusing on investment opportunities in stocks with high dividends, low valuations, and lower sensitivity to earnings. In Hong Kong, the non-bank financial sector’s medium- to long-term allocation value is highlighted under a convergence between low-valuation characteristics and improved earnings expectations. In diversified financials, with regulation logic stabilizing, a consumer-spending promotion orientation becoming clear, and an AI technology backdrop improving efficiency, the consumer finance industry is in a dual-driver period driven by both policy tailwinds and technology tailwinds.

CITIC CICC’s main viewpoints are as follows:

Securities: In 2025, the operating performance of listed securities firms is showing a steady and favorable trend, with business structure continuously optimized, and the advantages of leading firms in an all-around business setup further strengthened

Brokerage business benefited from increased market trading activity and the transfer of residents’ wealth, resulting in revenue achieving double-digit improvement; investment banking business has grown steadily, driven by the activation of M&A and restructuring policies and the recovery of IPO pacing; asset management business, despite deeper fee-rate reforms, has seen initial progress in its transition toward active management; investment business, supported by a two-wheel drive of stocks and bonds plus improvements in yields, continues to release performance momentum. With their capabilities for cross-business-chain coordination and advantages in balance sheets, leading securities firms continue to stay ahead in industry differentiation, further strengthening the foundation for high-quality development.

Insurance: Allocation value is becoming evident; it is recommended to focus on investment opportunities in stocks with high dividends, low valuations, and lower sensitivity to earnings

The current insurance sector allocation value is increasingly prominent. Taking Ping An A shares as an example, its PEV is 0.63x (same below as of 4/3), placing it in the 15% percentile over the past 1 year. Recently, due to factors such as the pullback in expectations for broad money supply and disturbances in input-driven inflation expectations, the term spread has widened. This week, the 10-year China government bond yield is 1.8199%, up 0.27 BP from last weekend, which helps solidify long-term spread performance. In recent years, insurance funds have continued to increase allocations to equity assets, and their earnings’ sensitivity to equity market performance has improved. However, by measuring under OCI, the impact of equity market volatility on profits can be reduced. For insurers with a relatively higher OCI equity allocation ratio, expected earnings stability is relatively better. If subsequent annual reports disclose information that brings fluctuations to share prices, investors can consider related allocation opportunities.

Views on the Hong Kong market and the Hong Kong Exchanges and Clearing House

In Hong Kong, the non-bank financial sector’s medium- to long-term allocation value is highlighted under a convergence between low-valuation characteristics and improved earnings expectations. This week (as of April 3), the Hong Kong stock market has recovered somewhat, with the Hang Seng Index +1.32%. Southbound capital’s trade participation ratio remains around the midline of 22.72%, providing solid support for liquidity in Hong Kong stocks. Valuations in the current sector are still at relatively low levels compared with major global markets. Although expectations for Fed rate cuts being pushed back have temporarily weakened the U.S. dollar liquidity support, the continuous improvement in pricing power of southbound capital offsets foreign capital volatility. The sector’s bottom support remains solid, and its medium- to long-term allocation value deserves attention.

Risk warning: Uncertainty in market price fluctuations, uncertainty in corporate earnings forecasts, and technological updates and iterations.