Central China Securities Co., Ltd. (601375.SH) released a report stating that the brokerage sector index hit a new high in early July since the rebound from mid-June lows, but subsequently fluctuated downward and transitioned into a sideways range-bound pattern. Its short-term strength trails only the SSE 50 Index, significantly outperforming tech-growth indices, demonstrating strong sector resilience amid increased market volatility. Once the equity market stabilizes and recovers, the brokerage sector remains expected to gradually recoup its year-to-date losses. It is recommended to actively monitor policy developments, market conditions, and the brokerage sector. Focus should be on leading listed brokers' A+H shares, small-to-medium listed brokers with gradually differentiated competitive advantages, listed brokers with strong comprehensive brokerage business capabilities, and listed brokers with individual stock valuations significantly below the sector average.
The report outlines key views on the sector's performance. In June, the brokerage sector shifted from weakness to strength. The Securities sub-index of CITIC's secondary industry rose 8.87% for the month, outperforming the CSI 300 Index (up 1.78%) by 7.09 percentage points. While the ratio of gainers to decliners among brokerage stocks improved significantly in June, internal divergence within the sector intensified markedly. The number of individual stocks outperforming the sector index declined further from the previous month, and the sector's average P/B ratio fluctuated within a range of 1.173-1.332 times.
Key market factors influencing listed brokers' operating performance in June include a cooling equity market with volatile fixed-income conditions, likely leading to a decline in proprietary trading income. Daily average stock trading volume fell slightly, though total monthly volume grew modestly, pushing brokerage business activity to a new high. Margin trading balances continued to hit historic highs, with the year-to-date average daily balance growth rate expanding. Both equity and debt financing volumes saw substantial growth, significantly boosting the industry's investment banking activity.
Looking at performance forecasts for July, proprietary trading faces pressure as the equity market environment turns frigid, while fixed-income operations remain stable. Brokerage business activity is expected to decline slightly, with daily average stock trading volume slipping month-on-month, though total monthly volume should remain near the year's second highest level. Margin trading balances are rapidly retreating from historic highs, sharply reducing the marginal contribution of this business to monthly performance. Investment banking will see further growth in equity financing, while debt financing may decline slightly, keeping total investment banking volume on an upward trend. Overall, based on the latest market changes, the volatility of listed brokers' monthly operating performance on a parent-company basis is expected to amplify significantly in July, putting pressure on results and potentially pushing total figures to a low point for the year.
Risks include a weakening equity and fixed-income market environment leading to declines in listed brokers' operating performance, short-term stock price volatility, and policy effects from the new round of capital market reforms falling short of expectations.