Sinolink Securities released a research report stating that the securities industry achieved strong year-on-year and quarter-on-quarter profit growth in Q3 2025, with leading brokerages posting double-digit annualized ROE. Despite high comparables, the sector demonstrated robust performance. Historical profit growth, sector price movements, ROE levels, and corresponding PB multiples suggest that stock prices and valuations still lag behind earnings performance. The report recommends high-quality brokerages whose valuations remain mismatched with fundamentals.

For the insurance sector, the combined net profit attributable to shareholders of five A-listed insurers reached RMB 247.8 billion in Q3 2025, up 68% YoY, driven by strong equity investment performance. Earnings significantly exceeded expectations, yet the sector remains underweighted. Market focus will shift to expectations for strong premium growth in early 2026. Sinolink Securities projects double-digit growth in new policy premiums for the upcoming year.

**Key Highlights:** **Securities Sector:** - Q1-Q3 2025 revenue for listed brokerages rose 43% YoY to RMB 419.6 billion, while net profit surged 62% to RMB 169 billion. - Q3 net profit grew 58% YoY and 25% QoQ to RMB 65 billion, reflecting resilient growth. - Annualized ROE improved by 2.67 percentage points to 7.5%, with average leverage rising to 3.47x (excluding client funds). - Brokerage, proprietary trading, and net interest income were key drivers, supported by active market turnover, margin financing expansion, and index gains.

**Insurance Sector:** - Leading insurers such as China Life and New China Life outperformed peers with 91.5% and 88.2% YoY profit growth, respectively, benefiting from equity exposure and balanced asset allocation. - PICC Property & Casualty delivered an 80.9% YoY profit increase, driven by underwriting and investment improvements. - NBV growth accelerated in Q3, with Ping An and CPIC reporting 58.3% and 29.4% YoY increases, respectively.

**Investment Recommendations:** 1. **Securities:** Focus on high-quality brokerages with undervalued stocks relative to earnings. 2. **Diversified Finance:** Highlight HKEX (00388) for its growth potential from stock connect programs and mainland IPOs, and JF SMARTINVEST (09636). 3. **Insurance:** Prioritize insurers with low liability costs and strong asset-liability management, such as CHINA TAIPING (00966).

**Risks:** Equity market volatility, declining long-term rates, and slower-than-expected capital market reforms.