Open Source Securities: Optimistic about the Spring Offensive in the Securities Sector

Open Source Securities points out that the high profitability, continued prosperity, low valuation, and long-term stagnation make the brokerage sector promising for a spring rally. Since 2025, the stagnation has lasted about a year, mainly due to the significant rise during the “9.24” period in 2024, restrictions on liquidity, and concerns over fee reductions. In early 2026, market activity is expected to expand, with wealth management and overseas businesses likely becoming key drivers for the sector’s profit growth. Valuations have gradually fallen to historic lows, and public fund holdings are at historic lows, supporting a positive outlook for the brokerage sector’s spring performance.

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Deposit Migration, Benefits on Both Sides of Non-Banking Liabilities and Assets — Non-Banking Financial Industry Investment Strategy for Spring 2026 - 20260305

1. Insurance: Dual-driven by liabilities and assets, with prominent equity flexibility

Liabilities side: Fully benefiting from resident deposit migration, dividend insurance shows high cost-effectiveness under bullish market expectations, combined with a low base, leading to good growth in new individual insurance policies at the start of 2026; bancassurance channels are expected to continue high growth seen in 2025. The proportion of dividend insurance continues to rise, and the decline in rigid liability costs benefits insurers’ valuation uplift.

2. Asset side: Stabilization of long-term interest rates and a favorable equity market support net assets and insurer profitability.

Around the Spring Festival, adjustments in insurance H-shares and A-shares were noticeable. Besides the high base effect from the early 2026 rally driven by the opening red and bullish expectations (New Year’s boost), concerns about AI impacts (potential substitution in sales channels like insurance intermediaries; potential impacts on white-collar employment and the economy) also exert negative pressure on the sector. We believe AI can improve operational efficiency for traditional financial institutions, and the medium-term positive trends in liabilities and assets remain unchanged. The average PEV valuation of listed insurers in A-shares has fallen to 0.78 times, offering good short-term risk-reward. From March to April, performance catalysts in insurance and brokerage sectors are expected to emerge, making it a good time to position, with recommendations including China Pacific Insurance, China Life H-shares, and Ping An.

3. Brokerage: Prosperity expected to continue, valuations still low, strategic increase in holdings recommended

Fundamentals are expected to remain strong, with ROE likely to continue rising in 2026. Market activity expanded significantly at the start of 2026, with high growth in new public fund issuance, and brokerage and wealth management businesses are expected to remain highly prosperous. Leading brokerages’ overseas expansion is also promising. We forecast that net profits of listed brokerages will grow by +52.3%/+29.6% year-over-year in 2025-2026 (excluding large non-recurring gains and losses), with weighted ROE reaching 10% in 2026.

The high profitability, low valuation, and long-term stagnation outlook make the brokerage sector attractive for a spring rally. Since 2025, stagnation has lasted about a year, mainly due to the significant rise during the 9.24 period in 2024, liquidity restrictions, and fee reduction concerns. In early 2026, market activity is expected to expand, with wealth management and overseas businesses likely becoming key drivers for profit growth. Valuations have fallen to historic lows, and public fund holdings are at historic lows, supporting a positive outlook for the sector’s spring performance.

Three main investment themes are recommended: undervalued securities with high profit contributions from wealth management, such as Huatai Securities and GF Securities; undervalued leading brokerages like Guotai Haitong, CICC H-shares, and CITIC Securities; and retail-focused firms like Guoxin Securities, benefiting from stocks like Tonghuashun.

(Source: First Financial)