Shenwan Hongyuan Group Co., Ltd. released a research report stating that the securities sector's Q3 25E net profit is expected to continue the H1 25 trend of over 50% year-on-year growth amid increased market trading volumes.

From market trading performance, Q3 25 Shanghai-Shenzhen-Beijing markets recorded daily average stock and fund trading volume of RMB 2.04 trillion (+153% YoY, +37% QoQ), with Q3 25 daily average margin trading balance of RMB 2.12 trillion (+49% YoY, +17% QoQ). In Hong Kong markets, year-to-date Hong Kong stock ADT reached HK$255 billion, up 93% compared to 2024 ADT. Year-to-date, 71 new companies listed in Hong Kong, raising HK$187.3 billion in IPOs (versus HK$88 billion raised in full-year 2024 Hong Kong IPOs). Q3 25 saw 25 new Hong Kong listings, raising a combined HK$77.3 billion (+83% YoY), with leading securities firms' overseas business expected to maintain high growth.

**Investment Business**: Equity markets performed strongly while bond market weakness may impact investment returns (Q3 25E proprietary trading revenue declined slightly QoQ)

Equity markets: Q3 25 key equity indices reached yearly highs, with CSI 300 up 17.90%, ChiNext up 50.40%, and STAR 50 up 49.02%. Bond markets: 10-year treasury yield rose to 1.86% during the reporting period, with CSI Aggregate Bond (Net) Index down 1.78% (vs +1.29% in Q2 25). Although most securities firms increased directional equity exposure in proprietary trading allocations, bond market declines caused Q3 25E securities firms' proprietary trading to decline slightly QoQ compared to Q2 25 when both stocks and bonds rose. Q3 25E securities sector is expected to achieve combined investment income of RMB 58 billion (+7% YoY, -5% QoQ), contributing 40% of main business revenue.

**Brokerage & Margin Trading Business**: Continues volume-up, price-down trend with incremental capital inflow expected

Market trading performance: Q3 25 Shanghai-Shenzhen-Beijing markets daily average stock and fund trading volume was RMB 2.04 trillion (+153% YoY, +37% QoQ, with July-September daily average stock trading volumes rising month-over-month). Q3 25 daily average margin trading balance was RMB 2.12 trillion (+49% YoY, +17% QoQ). New account openings: September 2025 Shanghai Stock Exchange disclosed 2.9372 million new A-share accounts (+61% YoY, +11% MoM), achieving positive month-over-month growth for four consecutive months. Market trading sentiment has not overheated, and household deposit migration is still in early stages, suggesting current trading levels are sustainable. Securities sector Q3 25E brokerage business revenue is expected at RMB 43.7 billion (+111% YoY, +43% QoQ), contributing 30% of main business revenue (brokerage revenue growth lower than market trading growth mainly due to commission rates still in downward trend).

**Investment Banking Business**: A-share equity financing significantly recovered from low base, with regulatory reviews accelerating alongside market recovery

Issuance: Based on issuance dates, Q3 25 A-share IPO scale reached RMB 38 billion (+148% YoY, +77% QoQ); refinancing (private placement + rights offering + preferred shares) scale was RMB 74 billion (+189% YoY, -87% QoQ, with QoQ decline mainly due to four major banks' private placements raising RMB 520 billion in June); Q3 25 securities firms' bond underwriting scale was RMB 4.6 trillion (+19% YoY, +9% QoQ). Review process: Q3 25 listing committee meetings reviewed 32 IPO applications (vs 22 in Q2 25). Securities sector Q3 25E investment banking business revenue is expected at RMB 9.2 billion (+19% YoY, +4% QoQ).

**Asset Management Business**: New equity fund issuance significantly recovered, ETF scale grew rapidly, securities firms' private asset management scale rebounded, maintaining relative resilience in asset management business revenue

Public funds: Q3 25 market-wide new equity-oriented public funds totaled 209.3 billion shares (+304% YoY, +43% QoQ). According to Wind statistics (excluding ETF feeder fund market value), end-Q3 25 market equity and mixed funds scale reached RMB 8.5 trillion, up 12% from end-Q2 25. ETF scale high growth: End-Q3 25 ETFs increased to RMB 5.6 trillion, up 31% from end-Q2 25. Securities firms' private asset management: According to Asset Management Association statistics, end-July 2025 securities firms and their asset management subsidiaries' private AUM was RMB 5.8 trillion. With individual investors accelerating market entry through funds and equity funds recovering under policy drivers, securities sector Q3 25E asset management business revenue is expected at RMB 11 billion (-2% YoY, -1% QoQ).

**Hong Kong Market Trading & IPO Activity**: Focus on international business performance contributions

Year-to-date Hong Kong stock ADT was HK$255 billion, up 93% compared to 2024 ADT. Year-to-date 71 new Hong Kong listings raised HK$187.3 billion in IPOs (vs HK$88 billion in full-year 2024 Hong Kong IPOs). Q3 25 saw 25 new Hong Kong listings raising combined HK$77.3 billion (+83% YoY). Leading securities firms' overseas business is expected to maintain high growth, focusing on high-elasticity performance targets and leading securities firms that completed international subsidiary capital increases early in the year (such as GF SEC).

**Investment Recommendations**

Shenwan Hongyuan Group Co., Ltd. expects securities sector Q3 25E net profit to continue H1 25's 50%+ YoY growth trend amid market trading volume expansion. 9M25E securities sector (42 listed securities firms) is expected to achieve attributable net profit of RMB 157 billion (+52% YoY), with Q3 25E securities sector achieving attributable net profit of RMB 61 billion (+54% YoY, +16% QoQ). Focus on securities sector allocation opportunities driven by three factors: loose liquidity, favorable policies, and performance-valuation mismatch.

Recommend three investment themes: 1) Leading institutions with strong comprehensive capabilities benefiting from industry competitive landscape optimization: GF SEC (000776.SZ, 01776), CITIC SEC (600030.SH, 06030), GTHT (601211.SH, 02611); 2) Securities firms with high performance elasticity: East Money (300059.SZ) and CMSC (600999.SH, 06099); 3) Targets with strong international business competitiveness: CGS (601881.SH, 06881), CICC (601995.SH, 03908).

**Risk Warnings**: Economic recovery below expectations; securities firm M&A progress below expectations; risk of goodwill or other asset impairment provisions from M&A activities at some securities firms.