SDIC Securities released a research report stating that recent regulatory policies have sent positive signals, encouraging differentiated competition among securities firms, improving long-term incentive mechanisms for public funds, and accelerating the inflow of medium- to long-term capital into the market, thereby reinforcing the upward trajectory of the capital market. Key takeaways are as follows:

**Lowering Insurers’ Risk Factor Coefficients to Boost Equity Market Investment** The National Financial Regulatory Administration recently issued a notice adjusting risk factors for insurers’ equity investments. Specifically, the risk factor for CSI 300 index constituents and CSI Dividend Low Volatility 100 index constituents held for over three years was reduced from 0.3 to 0.27, while that for ordinary stocks listed on the STAR Market held for over two years was lowered from 0.4 to 0.36. This adjustment is expected to reduce capital requirements for insurers’ equity holdings, freeing up more funds for equity investments and leveraging insurance capital as patient capital to enhance support for the real economy.

**New Public Fund Performance Rules Strengthen Incentive Mechanisms** Authorities recently issued draft guidelines on performance evaluation and compensation management for fund companies, aiming to refine long-term incentive mechanisms. Key measures include: 1) **Higher Investment Requirements**: Chairpersons and senior executives must invest at least 30% of their annual performance pay in their own funds, while fund managers must allocate no less than 40%. 2) **Performance-Linked Pay Cuts**: Fund managers whose products underperform benchmarks by over 10 percentage points for three consecutive years with negative returns face a minimum 30% pay reduction. Those with positive returns but underperformance will also see reduced compensation. 3) **Long-Term Performance Focus**: Fund companies must prioritize long-term investment returns, with at least 80% of performance metrics weighted toward three-year or longer periods. 4) **Encouraging Retirement Plans**: Fund firms are urged to establish corporate pensions and support employees’ participation in personal pension schemes. These rules aim to align fund managers’ interests with investors, promote stable operations, and drive high-quality development in the public fund industry.

**Easing Leverage Limits for Securities Firms to Foster Global Competitiveness** CSRC Chairman Wu Qing proposed optimizing evaluation metrics and moderately relaxing leverage limits for high-quality securities firms to enhance capital efficiency. He emphasized shifting from price competition to value competition. This move is expected to improve ROE for top-tier firms and strengthen their global competitiveness, accelerating the development of world-class investment banks.

**Investment Recommendations** Investors are advised to focus on leading securities firms such as CITIC SEC (06030), HTSC (06886), and GF SEC (01776), as well as CHINA LIFE (02628) for its strong growth and distribution advantages, and PING AN (02318) for its high dividends and improving fundamentals.

**Risks**: Regulatory uncertainty and significant equity market volatility.