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

China Jianjiang Securities Research Report states that the securities sector has improving prospects across three marginal factors, and 2026 earnings are worth期待超预期. For the insurance sector, the allocation value is becoming evident; it is recommended to look for investment opportunities in individual stocks with high dividends, low valuations, and lower earnings sensitivity. In Hong Kong, the non-bank financials sector has outstanding long- to mid-term allocation value as low-valuation characteristics and expectations of profit improvement resonate. In the multi-finance sector, with regulatory logic stabilizing, a clear direction of promoting consumption, and an AI-technology-driven efficiency boost, the consumer finance industry is in a dual-boost period of both policy dividends + and technology dividends.

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China Jianjiang Securities | Non-bank financial valuations are at a low level, making strategic sector allocation value stand out

Securities: The securities sector is improving across three marginal factors, and 2026 earnings are well worth期待超预期. Insurance: Allocation value is emerging; it is recommended to focus on investment opportunities in individual stocks with high dividends, low valuations, and lower earnings sensitivity. Perspectives from the Hong Kong market and Hong Kong Exchanges and Clearing: Under the resonance between low-valuation characteristics and expectations of profit improvement, the non-bank financials sector in Hong Kong highlights its long- to mid-term allocation value. Perspectives on diversified finance: With regulatory logic stabilizing, a clearly defined consumption-promotion orientation, and the backdrop of AI technology improving efficiency, the consumer finance industry is in a dual-driver period of both policy dividends+ and technology dividends.

Securities: The securities sector is improving across three marginal factors, and 2026 earnings are well worth期待超预期. From March 23 to 27, the market’s average daily trading value reached CNY 8B, down 4.50% month over month and up 67.48% year over year. As of March 27, 2026, the balance of margin financing and securities lending across the three mainland markets (Shanghai, Shenzhen, and Beijing) totaled CNY 2.11T, up 2.99% from the beginning of the year, and accounting for 2.67% of the circulating market value of A-shares. The net asset value (NAV) scale of public funds reached CNY 36.95 trillion, down 1.92% from the end of 2025. Compared with the end of 2025, the share of NAV for 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 dividends, low valuations, and lower earnings sensitivity. At present, the insurance sector’s share prices have basically retreated to around the early-December 2025 level; allocation value stands out. Taking Ping An A-shares as an example, its PEV is 0.66x (as of 3/20, same below), placing it at the 14% percentile over the past 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 easier monetary policy and disruptions to imported inflation expectations, the term spread has widened. This week, the yield on the 10-year Chinese government bond is 1.8172%, which helps reinforce the performance of long-term term spread. In recent years, insurance funds have continued to increase their allocation to equity assets, and the earnings elasticity to equity market performance has been enhanced to some extent. However, measuring equity via OCI can reduce the impact of equity market volatility on profits. For insurers with a relatively higher OCI stock allocation ratio, their earnings stability is expected to be relatively better. If subsequent annual report disclosures bring disruptions to share prices, investors may consider the ensuing allocation opportunities.

Perspectives from the Hong Kong market and HKEX: Under the resonance between low-valuation characteristics and expectations of profit improvement, the non-bank financials sector in Hong Kong highlights its outstanding long- to mid-term allocation value. During the March market pullback, northbound capital’s willingness to step in on dips increased, and the transaction share rebounded to 22%, while domestic pricing power continued to improve steadily, effectively offsetting volatility from overseas capital. Although expectations for Fed rate cuts being pushed out have suppressed valuation expansion momentum, the sector’s valuations are still at historically low levels. In addition, with room for insurers’ equity allocations being opened up and brokerages’ and asset-management businesses benefiting from a rebound in trading activity, profitability improvement certainty is stronger. It is recommended to seize opportunities driven by a double engine of valuation repair and earnings realization.

From March 23 to March 27, the Securities II (CITIC) index was -3.55%, outperforming the non-bank financials index, but underperforming the CSI 300 and the SSE 50 indices.

Three marginal factors are trending favorably, and 2026 securities sector earnings beyond expectations are worth期待

1、The trend of a year-on-year surge in trading activity during the first half has been established; full-year growth may exceed expectations. As of the end of February 2026, the average daily stock trading value in A-shares across Shanghai and Shenzhen was CNY 2.62T, up 80% year over year. Even under a conservative assumption that daily average trading value from March to June falls back to CNY 2.0 trillion, the overall average daily trading value for the first half can still reach CNY 2.2 trillion, up 60% year over year; if daily average trading value in the second half remains at CNY 2.0 trillion, full-year average daily trading value would be CNY 2.1 trillion, up 22%. As A-share trading activity gradually stabilizes, the probability that brokerages’ operating performance will exceed expectations is significantly higher.

2、Strong data on new account openings at the start of the year; incremental retail capital is ready to launch. According to data from the Shanghai Stock Exchange, in January 2026, the number of new A-share account openings was about 4.92 million, a new high in nearly one year, second only to 6.85 million in October 2024. In the short term, although concentrated surge in new account openings may signal a temporary high point in market sentiment, in reality it helps lay the foundation of incremental capital for a long-run bull market in A-shares, continuously injecting long-term momentum.

3、The marginal expansion in bond issuance and financing by brokerages is significant, and it is expected to drive leverage up and 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%~8%, but the leverage multiple did not show a clear increase. In January to February 2025, the total bond issuance amount for 50 sample brokerages was CNY 117.2 billion; in the same period of 2026, it increased to CNY 375.7 billion, a year-on-year surge of 221%. Faster acceleration in leverage expansion is expected to push the industry’s ROE to a new high again, thereby lifting the sector’s overall valuation center of gravity.

This week, stock trading value continues to maintain a high level, and market trading sentiment is still elevated. From March 23 to 27, the market’s average daily trading value reached CNY 369.5k, down 4.50% month over month and up 67.48% year over year. A loose monetary environment (rate cuts and RRR cuts) and inflows of foreign capital (benefiting from the Fed’s shift and RMB internationalization) jointly inject incremental funds. At the same time, “the 15th Five-Year Plan for technological breakthroughs” focusing on technology breakthroughs (AI, the industrialization of brain-computer interface technology) and a rebound in domestic demand drive improvements in corporate earnings. On top of that, deepening reforms in the capital markets enhance confidence, and the policy package will fully activate market trading enthusiasm.

Margin financing and securities lending balances remain above the CNY 2 trillion threshold, indicating high market risk appetite. As of March 27, 2026, the balance of margin financing and securities lending across the three mainland markets totaled CNY 2.74T, up 2.99% from the beginning of the year, and accounting for 2.67% of the circulating market value of A-shares. In the short term, leveraged funds show a continued inflow trend, and market risk appetite has risen markedly. An increasing number of investors are choosing to participate in margin financing and securities lending transactions, reflecting investors’ positive expectations for the market trend.

IPO and refinancing pacing is steady, focusing on new productive forces. For IPO issuance, based on issuance dates, in March 2026 (as of March 27), a total of 9 companies were listed, raising CNY 20k. The new “Nine Regulations” clearly proposes to “strictly control market entry for issuance and listing.” The China Securities Regulatory Commission strengthens reviews of the entire IPO process, focusing on cracking down on issues such as financial fraud and special dividends. As a result, listing thresholds for companies are raised. With deepening capital market reforms, including the Beijing Stock Exchange focusing on “specialized, refined, and new” enterprises and the STAR Market supporting hard technology, the IPO market may gradually warm up, while project quality will also continue to improve. For refinancing, in March 2026 (as of March 27), the total scale of equity refinancing by enterprises was CNY 22k.

Public funds: In terms of size, growth continues, and the share of stock funds increases slightly. According to Wind data, as of March 27, the net asset value scale of China’s public funds reached CNY 36.95 trillion, down 1.92% from the end of 2025. Compared with the end of 2025, the share of NAV for 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 China Securities Regulatory Commission, together with multiple departments, jointly issued the “Implementation Plan on Promoting the Entry of Medium- and Long-Term Funds into the Market,” the “Action Plan on Promoting High-Quality Development of Public Funds,” and the “Regulations on Sales Fees Management for Publicly Offered Securities Investment Funds.” The above plans make it clear that, over the next three years, the NAV of public funds holding A-share circulating market value must increase by at least 10% each year, and that the assessment cycle will be extended to more than three years. This is designed to encourage long-term investment behavior; and to promote the industry’s vivid practice of the regulatory philosophy of “investors at the center,” 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, ranking at the 0.34%/28.97%/21.82% percentile levels over the past one/three/five years.

External environment: This week, the Fed kept interest rates unchanged, but the dot plot compressed expectations for rate cuts in 2026 to only once, pushing U.S. Treasury yields higher and prompting funds to shift toward defensive assets. The Fed announced that it would keep the target range for the federal funds rate at 3.5% to 3.75%, in line with market expectations. However, the updated dot plot shows that policymakers expect only one rate cut in 2026, tightening the easing path compared with earlier market expectations. In a press conference, Fed Chair Jerome Powell emphasized that inflation is still slightly above the target level; if the Fed does not see clear progress in inflation returning downward, it will not initiate rate cuts. He also rarely mentioned the possibility of further rate hikes, reflecting that energy price shocks caused by geopolitical conflicts in the Middle East have intensified policy uncertainty. As a result, market pricing for the number of rate cuts in 2026 has been revised down from multiple cuts at the beginning of the year to around once. Valuations of risk assets face pressure. From an investment perspective, the Fed is currently in a “wait-for-data” mode; the extension of a high-interest-rate environment will weigh on growth stock valuations and lead funds 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 how the next FOMC meeting further confirms inflation and employment data.

Uncertainty in market price fluctuations: There are many factors that affect capital market prices. These include fluctuations in the macroeconomy, changes in global economic conditions, and fluctuations in investor sentiment. These factors may trigger changes in stock prices or affect the valuation of institutions such as brokerages and insurance companies. However, for non-bank financial institutions, earnings are more significantly affected by market prices and trading volumes.

Uncertainty in corporate earnings forecasts: Earnings for the securities and insurance industries are influenced by multiple factors. The reports have some uncertainty in their valuation and performance forecasts for the industries. In addition, intensified competition within the industry may also lead to deviations in forecast results.

Technology updates and iteration: The rapid development of emerging technologies requires financial institutions to continuously keep up with and adapt to changes brought by technology. However, faster iteration cycles also bring high R&D spending and talent training costs, which may increase operating costs for brokerages and insurance companies. At the same time, the breakout of technological innovation has a certain degree of uncertainty.

(Source: First Financial)