Open source securities: the fundamentals of brokerage firms have bottomed out
The State Council issued “Certain Opinions on Strengthening Supervision and Risk Prevention and Promoting High-Quality Development of the Capital Market”, which consists of 9 parts.
Following the two “National Nine Rules” in 2004 and 2014, the State Council once again issued a capital market guidance document after a lapse of 10 years.
Historically, after the “National Nine Rules” were introduced twice in 2004 and 2014, the market experienced two bull markets at 6124 points in 2007 and 5178 points in 2015.
China Merchants Securities pointed out that under multiple adverse shocks, brokers' total net profit declined in 2023, with high flexibility in self-operation and steady asset management, both of which became the main highlights; looking back, policies continued to gain strength, market sentiment improved, and brokers' performance was expected to be “promising.”
Currently, the PB valuation of the brokerage index is 1.21, which is at the bottom of history. There is a clear mismatch between valuation and industry fundamentals, and there is plenty of room for repair.
According to the Open Source Securities Research Report, the new “National Nine Rules” emphasize that brokerage firms put functionality first, that investment banking and wealth management capacity building are future priorities, that the futures and derivatives markets are developed in a steady and orderly manner, and that the focus of brokerage business may once again lean towards capital-light business.
Spot checks of investment banks and companies to be listed have increased, and the proportion of on-site inspections has increased, and the impact on leading brokerage firms with sound compliance and risk control is relatively small.
In a policy-oriented context of strict supervision and the creation of high-quality leading brokerage firms, industry concentration is expected to increase at an accelerated pace.
The 1+N policy is conducive to the restoration of investor confidence. The fundamentals of brokerage firms have bottomed out, and sector valuations have returned to the bottom.
Companies related to Chinese brokerage firms:
China Merchants Securities (06099), Everbright Securities (06178), CICC (03908), Guangfa Securities (01776), Cathay Pacific Junan (02611), Guolian Securities (01456), etc.