CITIC Securities: The securities sector shows triple marginal improvement; 2026 performance is expected to surpass expectations

CITIC Securities Research Report states that the threefold margins of the securities sector are improving, and performance beyond expectations in 2026 is anticipated. 1. Trading activity in the first half of the year has significantly increased year-over-year, with full-year growth potentially exceeding expectations; 2. Bright new account opening data at the beginning of the year indicates retail investor inflows are poised; 3. The marginal expansion of bond issuance financing by brokerages is likely to drive leverage up and break through industry ROE highs.

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CITIC Securities | Continued Performance Flexibility, Non-Bank Sector Valuation Highlights

Securities: The threefold margins of the securities sector are improving, and performance beyond expectations in 2026 is expected. Insurance: Valuation advantages are emerging; investment opportunities in high-dividend, low-valuation, and less performance-sensitive stocks are recommended. Hong Kong Market and HKEX Viewpoint: The Hong Kong stock market is expected to remain highly active in 2026, with a focus on the upward potential of the non-bank sector. Diversified Financials: Under the backdrop of stable regulatory logic, clear consumption-driven policies, and AI technology efficiency gains, the consumer finance industry is in a period driven by both policy and technological dividends.

The securities sector continues to show positive margins, with expectations of outperforming in 2026. This week, stock trading volume remained high, with market sentiment still elevated. From March 16-20, the average daily trading volume reached 22.11 trillion yuan, down 11.51% week-over-week but up 42.68% year-over-year. As of March 20, 2026, the margin financing and securities lending balance in Shanghai, Shenzhen, and Beijing markets reached 2.65 trillion yuan, up 4.31% from the start of the year, accounting for 2.63% of A-shares’ circulating market value. According to Wind data, as of March 20, the net asset value of Chinese public funds reached 37.02 trillion yuan, down 1.74% from the end of 2025. Compared to the end of 2025, stock funds’ NAV share decreased by 2.07 percentage points to 13.99%, bond funds increased by 0.38 percentage points to 29.88%, and hybrid funds rose by 0.46 percentage points to 10.17%.

Insurance: Valuation advantages are emerging, with investment opportunities in high-dividend, low-valuation, and less performance-sensitive stocks recommended. Currently, insurance stocks have retreated to levels near early December 2025, highlighting valuation advantages. For example, Ping An A-shares have a PEV of 0.66x (as of 3/20), in the 32nd percentile over the past year, with a 2025 estimated dividend yield of about 4.7%. The dividend yield of the Hongli Red Dividend Index is 4.69%. Recent factors such as easing monetary policy expectations and disturbances from imported inflation expectations have widened the term spread, with the 10-year government bond yield rising 1.56 basis points to 1.8299%, supporting long-term spread stability. Insurance funds have increased their allocation to equities in recent years, improving their performance resilience to equity market fluctuations. Using OCI measurement can reduce profit volatility caused by market swings. Insurers with higher OCI stock allocation are expected to have more stable profits. If annual report disclosures cause stock price fluctuations, opportunities for allocation can be considered. As of H1 2025, China Life/Ping An/PICC/Taiping Sunshine’s OCI stock allocations were 2.0%, 6.8%, 3.3%, 2.2%, 2.5%, 2.9%, and 10.0%, respectively.

Securities Industry Viewpoint

From March 16-20, the CITIC Securities II Index fell 2.80%, underperforming the Non-Bank Financials Index, CSI 300, and SSE 50.

The threefold margins are improving, and the securities sector’s performance in 2026 is expected to surpass expectations.

1. Trading activity in the first half of the year has significantly increased YoY, with full-year growth possibly exceeding expectations. By the end of February 2026, the average daily trading volume of A-shares in Shanghai and Shenzhen reached 27.425 trillion yuan, up 80% YoY. Even with a conservative assumption that daily trading volume drops to 20 trillion yuan from March to June, the first half’s average remains at 22 trillion yuan, up 60% YoY. If the second half maintains 20 trillion yuan daily, the full year would average 21 trillion yuan, a 22% increase. As trading activity stabilizes, the probability of earnings exceeding expectations for brokerages significantly increases.

2. Bright new account opening data at the start of the year indicates retail inflows are building up. According to the Shanghai Stock Exchange, in January 2026, approximately 4.92 million new A-share accounts were opened, the highest in nearly a year, second only to October 2024’s 6.85 million. While a surge in new accounts may signal short-term market sentiment peaks, it also lays a long-term foundation for a gradual bull market, continuously fueling long-term momentum.

3. The marginal expansion of bond issuance financing by brokerages is likely to drive leverage higher and break through industry ROE highs. The average ROE of listed brokerages in the first three quarters of 2025 reached relatively high levels of 7-8%, without significant leverage growth. In January-February 2025, 50 sample brokerages issued bonds totaling 117.2 billion yuan; in the same period in 2026, issuance surged to 375.7 billion yuan, a 221% YoY increase. Accelerated leverage expansion could push industry ROE to new highs and elevate overall sector valuation.

This week, stock trading volume remained high, with market sentiment still elevated. From March 16-20, the average daily trading volume was 22.11 trillion yuan, down 11.51% WoW but up 42.68% YoY. A loose monetary environment (interest rate cuts and reserve requirement reductions), along with foreign capital inflows (benefiting from Fed pivot and RMB internationalization), inject additional liquidity. Meanwhile, focus on technological breakthroughs (AI, brain-computer interfaces) and domestic demand recovery is boosting corporate profits. Deepening market reforms and policy measures are further boosting confidence, fully activating trading enthusiasm.

The margin financing and securities lending balance remains above 20 trillion yuan, indicating high market risk appetite. As of March 20, 2026, the balance in Shanghai, Shenzhen, and Beijing markets was 2.65 trillion yuan, up 4.31% from the start of the year, representing 2.63% of A-shares’ circulating market value. Short-term leverage continues to flow into the market, reflecting increased risk appetite. More investors are participating in margin trading, showing positive market expectations.

IPO and refinancing are proceeding steadily, focusing on new productive capacity. In March 2026 (up to March 20), four companies went public, raising 2.71 billion yuan. The new “Six Regulations” emphasize strict review of IPOs, targeting issues like financial fraud and sudden dividends, raising listing thresholds. With ongoing reform, including the Beijing Stock Exchange’s focus on specialized and innovative firms and STAR Market’s support for hard tech, IPO activity is expected to gradually recover, with project quality improving. In March 2026, total refinancing amounted to 53.11 billion yuan.

Public fund assets continue to slightly decline, with a decrease in stock fund proportion. As of March 20, 2026, the net asset value of Chinese public funds was 37.02 trillion yuan, down 1.74% from the end of 2025. Stock funds’ share decreased by 2.07 percentage points to 13.99%; bond funds increased by 0.38 percentage points to 29.88%; hybrid funds rose by 0.46 percentage points to 10.17%. In 2025, the CSRC and other departments issued policies to promote long-term capital inflows, requiring public funds to grow their A-share holdings by at least 10% annually over three years and extending assessment periods to encourage long-term investment, marking a new phase focused on investor interests and high-quality development.

Valuation levels: As of March 20, the Wind Securities II (Shenwan) sector PB (LF) ratio was approximately 1.23x, at the 1.03rd percentile over the past year, 38.45th percentile over three years, and 29.72nd percentile over five years.

External environment: The Fed kept interest rates steady, with geopolitical disturbances possibly delaying rate cuts. On March 18, the Fed announced maintaining the federal funds rate target at 3.5%-3.75%, in line with expectations. Of 12 FOMC members, 11 supported holding rates steady; only Fed Governor Milani supported a 25 basis point cut. The Fed cited ongoing moderate economic growth, slowing employment gains, stable unemployment, but persistent inflation. The decision to hold rates was mainly due to recent geopolitical tensions affecting inflation. Given inflation uncertainties, the Fed is expected to remain cautious and slightly hawkish, with a possible delay of rate cuts to September or October, and only one cut projected for the year.

Market price volatility uncertainty: Numerous factors influence capital market prices, including macroeconomic fluctuations, global economic changes, and investor sentiment, which can trigger stock price movements and impact valuations of brokerages, insurers, and other institutions. The non-bank financial sector’s performance is more directly affected by market prices and trading volumes.

Corporate earnings forecast uncertainty: Earnings for securities and insurance sectors are affected by multiple factors, and valuation and performance predictions carry inherent uncertainties. Increasing industry competition may also lead to deviations from forecasts.

Technological updates: Rapid development of emerging technologies requires financial institutions to continuously adapt, but faster innovation also entails high R&D costs and talent training expenses, potentially increasing operating costs. The burst of technological innovation remains uncertain.

(Source: People’s Financial News)