CITIC Securities: Non-bank valuations are at a low level, highlighting the strategic value of sector allocation

CITIC Securities’ research report states that the securities sector is seeing a favorable trend on three fronts at the margin, and outperformance in 2026 earnings is worth expecting. In the insurance sector, the value of allocation is becoming evident. It is recommended to look for investment opportunities in individual stocks with high dividend yields, low valuations, and lower earnings sensitivity. In Hong Kong-listed non-banking financials, the long-term value for strategic allocation stands out under the resonance between low-valuation characteristics and improving earnings expectations. As for the diversified financials segment, with the regulatory logic stabilizing, a clear consumer-spending support orientation, and a backdrop of AI technology improving efficiency, the consumer finance industry is in a dual-driven period of policy dividends + technology dividends.

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CITIC Jianlong | Non-bank financial valuations are at a low level, and strategic allocation value for the sector is highlighted

Securities: The securities sector is seeing improvement on three fronts at the margin, and 2026 earnings with upside surprises are worth expecting. Insurance: Allocation value is emerging; it is recommended to focus on investment opportunities in individual stocks with high dividend yields, low valuations, and lower earnings sensitivity. Hong Kong market and HKEX views: The non-banking financials in Hong Kong, under the resonance between low-valuation characteristics and improving earnings expectations, show a prominent long-term strategic allocation value. Diversified financial views: Against the backdrop of stabilizing regulatory logic, a clearly defined consumer-spending initiative, and AI technology improving efficiency, the consumer finance industry is in a dual-dynamics period driven by both policy dividends + technology dividends.

Securities: The securities sector is seeing improvement on three fronts at the margin, and 2026 earnings with upside surprises are worth expecting. From March 23 to 27, the market’s average daily trading value reached RMB 21,115.58 billion, down 4.50% month over month, and up 67.48% year over year. As of March 27, 2026, the financing and securities lending balances across the Shanghai, Shenzhen, and Beijing markets totaled RMB 26,165.50 billion, up 2.99% from the beginning of the year, and accounting for 2.67% of the market value of A-share tradables. Public funds’ net asset value (NAV) scale reached RMB 36.95 trillion, down 1.92% versus the end of 2025. Compared with the end of 2025, the NAV share of stock funds decreased from 16.06% by 2.16 percentage points to 13.90%; bond funds increased from 29.50% by 0.51 percentage points to 30.01%; while hybrid funds increased from 9.71% by 0.51 percentage points to 10.22%.

Insurance: Allocation value is emerging; it is recommended to focus on investment opportunities in individual stocks with high dividend yields, low valuations, and lower earnings sensitivity. Currently, the share prices of the insurance sector have basically fallen back to around early December 2025. Allocation value stands out. Taking Ping An A shares as an example, its PEV is 0.66x (as of 3/20, same below), which is at the 14% percentile over the past one year. Its 2025E dividend yield is about 4.7%, and the dividend yield of the Dividend Low Volatility 100 Index is 4.76%. Recently, affected by factors such as the pullback in expectations for loose monetary policy and disruptions from imported inflation expectations, the term spread has widened. This week, the yield of the 10-year China government bond stands at 1.8172%, which helps underpin the performance of long-term term spreads. Over recent years, insurance funds have continued to increase their allocation to equity assets, and their earnings have become more sensitive—showing greater elasticity—to equity market performance. However, measuring under OCI can reduce the impact of equity market volatility on profits. For insurers with a higher proportion of equity allocation under OCI measurement, the stability of expected profits is relatively better. If subsequent annual report disclosures bring disturbances to share prices, investors may want to consider allocation opportunities.

Hong Kong market and HKEX views: The non-banking financials in Hong Kong, under the resonance between low-valuation characteristics and improving earnings expectations, show a prominent long-term strategic allocation value. During the March market pullback, southbound capital’s willingness to deploy at lower levels strengthened; the proportion of trades rose back to 22%. The pricing power of domestic investors has steadily improved, effectively hedging volatility from foreign capital. Although expectations for Fed rate cuts have been pushed back, suppressing the momentum for valuation expansion, the sector’s valuations are still at historical lows. In addition, with room opening up for insurers’ equity allocations and brokerages’ brokerage and asset management businesses benefiting from a rebound in trading activity, earnings improvement has strong certainty. It is recommended to seize opportunities driven by both valuation repair and earnings delivery.

From March 23 to March 27, the Securities II (CITIC) index fell by -3.55%, outperforming the non-banking financials index but underperforming the CSI 300 Index and the SSE 50 Index.

Three-front marginal changes are turning for the better; 2026 securities sector earnings that exceed expectations are worth looking forward to

1、The trend of a significant year-over-year increase in trading activity in the first half is established; full-year growth may exceed expectations. By the end of February 2026, the average daily trading value of stocks in A shares across the Shanghai and Shenzhen markets reached RMB 27,425 billion, with a year-over-year growth rate of 80%. Even under a conservative assumption that average daily trading value from March to June falls back to RMB 2.0 trillion, the overall average daily trading value in the first half can still reach RMB 2.2 trillion, implying a year-over-year growth rate of 60%. If average daily trading value in the second half remains at RMB 2.0 trillion, full-year average daily trading value will reach RMB 2.1 trillion, growing 22% year over year. As trading activity in A shares gradually stabilizes, the probability of the brokerage sector’s operating performance showing upside beyond expectations is significantly higher.

2、Strong new account opening data at the start of the year; incremental retail funds are gathering strength, ready to be deployed. According to data from the Shanghai Stock Exchange, in January 2026 the number of new A-share accounts was about 4.92 million, setting a new high in nearly one year, second only to the 6.85 million accounts in October 2024. In the short term, although a concentrated surge in new account openings could be a high-level signal for market sentiment at a certain stage, in fact, in the long term it lays a foundation for incremental funds to support a slow bull market in A shares, continuously injecting long-term momentum.

3、The marginal expansion in debt financing by brokerages accelerates; it is expected to drive leverage improvement and help break through the industry’s ROE peak. In the first three quarters of 2025, the average ROE of listed brokerages had already risen to a relatively high level of 7% to 8%, but the leverage multiple did not show obvious growth. In January and February 2025, the total amount of debt issued by 50 sample brokerages was RMB 117.2 billion; in the same period of 2026, it increased to RMB 375.7 billion, up 221% year over year. Faster leverage expansion is expected to push the industry’s ROE to set new highs again, thereby raising the overall valuation center of the sector.

This week, stock trading value continues to maintain a high level, and market trading sentiment remains relatively elevated. From March 23 to 27, the market’s average daily trading value reached RMB 21,115.58 billion, down 4.50% month over month, and up 67.48% year over year. A loose monetary environment (rate cuts and reserve requirement cuts) and inflows from foreign capital (benefiting from the Fed’s shift and RMB internationalization) jointly inject incremental funds. Meanwhile, technology breakthroughs emphasized in the “15th five-year plan for 2026 to 2030” period (AI, brain-computer interface industrialization) and a recovery in domestic demand drive firms’ earnings to rebound. On top of that, deepening reforms in the capital markets boost confidence, and a package of policy measures will comprehensively activate market trading enthusiasm.

Two-margin (margin financing and securities lending) balances remain above the RMB 2 trillion threshold, indicating higher market risk appetite. As of March 27, 2026, the financing and securities lending balances across the Shanghai, Shenzhen, and Beijing markets totaled RMB 26,165.50 billion, up 2.99% from the beginning of the year, accounting for 2.67% of the market value of A-share tradables. In the short term, leverage funds show a sustained inflow trend, and market risk appetite has risen significantly. More and more investors choose to participate in two-margin transactions, reflecting investors’ positive expectations for market conditions.

The IPO and refinancing cadence is stable, focusing on new productive forces. In terms of IPO issuance, according to the issue date, in March 2026 (as of March 27) a total of 9 companies were listed, raising RMB 7.289 billion. The new “Nine Provisions” clearly proposes “strictly controlling the entry gate for issuance and listing.” The CSRC has strengthened review across the entire IPO process, focusing on cracking down on issues such as financial fraud and ad-hoc bonus/ dividend payments. As a result, listing thresholds are raised. With deeper capital market reforms, including the Beijing Stock Exchange focusing on “specialized, refined, distinctive, and innovative” firms and the Sci-Tech Innovation Board supporting hard technology, the IPO market may gradually rebound, while project quality will also keep improving. In refinancing, in March 2026 (as of March 27), the total scale of equity refinancing by companies was RMB 61.306 billion.

For public funds, scale continues to grow, and the share of stock funds increases slightly. According to Wind data, as of March 27, China’s public fund NAV scale reached RMB 36.95 trillion, down 1.92% versus the end of 2025. Compared with the end of 2025, the NAV share of stock funds decreased from 16.06% by 2.16 percentage points to 13.90%; bond funds increased from 29.50% by 0.51 percentage points to 30.01%; while hybrid funds increased from 9.71% by 0.51 percentage points to 10.22%. In 2025, the CSRC, together with multiple departments, jointly released the “Implementation Plan on Promoting the Entry of Medium- to Long-Term Funds into the Market,” the “Action Plan on Promoting the High-Quality Development of Public Funds,” and the “Provisions on the Management of Sales Fees for Publicly Offered Securities Investment Funds.” The above plans clearly state that the NAV of public funds’ holdings of A-share tradable market value must increase by at least 10% each year over the next three years, and the assessment period has been extended to more than three years, thereby encouraging long-term investment behavior. They also promote the industry to practice in a vivid way the regulatory philosophy of “investors first,” signaling that China’s public fund industry has fully entered a new stage with investor interests at the core and high-quality development as the goal.

Valuation level: As of March 27, the PB(LF) valuation of the Wind Securities II (Shenwan) sector is about 1.18x, at the 0.34%/28.97%/21.82% percentile of the last one/three/five years.

External environment: This week, the Fed kept interest rates unchanged, but the dot plot compresses expectations for Fed rate cuts in 2026 to just once, pushing up U.S. Treasury yields and encouraging funds to shift toward defensive assets. The Fed announced that the target range for the federal funds rate will remain unchanged at 3.5% to 3.75%, matching market expectations. However, the updated dot plot shows policymakers expect only one rate cut in 2026, tightening the easing path compared with earlier market expectations. In a press conference, Fed Chair Powell emphasized that inflation is still slightly above the target level. If there is no clear progress showing inflation falling, the Fed will not initiate rate cuts. He rarely mentioned the possibility of rate hikes next, reflecting that energy price shocks arising from geopolitical conflicts in the Middle East have intensified policy uncertainty. As a result, market pricing for how many times the Fed will cut rates in 2026 has been revised downward from multiple cuts at the start of the year to around just once. Valuations of risk assets are under pressure. From an investment perspective, the Fed is currently in a “wait for data” mode. A prolonged high-interest-rate environment will suppress the valuations of growth stocks and cause capital to tilt toward short-duration bonds, high-quality cash-flow assets, and defensive sectors. Investors need to reduce expectations for an easing cycle within the year and focus on the next FOMC meeting for further confirmation of inflation and employment data.

Uncertainty in market price fluctuations: There are many factors influencing capital market prices, including fluctuations in the macroeconomy, changes in global economic conditions, and fluctuations in investor sentiment. These can all trigger changes in share prices, and can also affect the valuation of institutions such as brokerages and insurance companies. Meanwhile, the performance of the non-banking financial industry is much more influenced by market prices and trading volumes.

Uncertainty in corporate earnings forecasts: The earnings of the securities and insurance industries are affected by many factors. The report has certain uncertainty regarding industry valuation and performance forecasts. In addition, intensified competition within the industry may also cause forecast results to deviate.

Technology update and iteration: The rapid development of emerging technologies requires financial institutions to continuously follow and adapt to technological change. However, the accelerating pace of technology update and iteration also brings high R&D investment and talent training costs, which may increase operating costs for brokerages and insurance companies. At the same time, the breakout of technological innovation carries a certain degree of uncertainty.

（Source: First Financial）