Shenwan Hongyuan has released a research report stating that with the deepening evolution of capital market conditions since the "924" policy shift, investment in the brokerage sector has moved from trading-oriented opportunities into a window for allocating to quality targets. Recently, the policy bottom has gradually emerged, and given the brokerage sector's forward-pricing characteristics, its valuation level has bottomed ahead of the broader market. There are three major clues through which leading institutions are driving industry evolution, and the market may need to re-examine its pricing: 1) optimization of the market landscape driven by key M&A and consolidation; 2) leading transformation in wealth management, optimized revenue structure, and continuous accumulation of the client base; 3) international business resource replenishment gradually falling into place, with performance growth expected to be released under the premise of solid risk assessment, creating new room for revenue expansion. In addition, considering that leading institutions have more stable and superior allocation capabilities in capital-based businesses and stronger resilience in fee-based businesses, they may demonstrate greater advantages in a headwind operating environment. The main views of Shenwan Hongyuan Group Co.,Ltd. (000166) are as follows:
Market Review: Capital Factors and Operating Cooling in Succession; Sector Performance Weak for the Year, Underperforming the Broader Market; Sector Investment Shifts from Trading Opportunities to Quality Target Allocation Window
Review: Since the "924" policy shift, the brokerage sector's trajectory has presented four major phases. Phase 1 (early September 2024 to end of August 2025): domestic capital markets bottomed and rebounded after "924," and the brokerage sector delivered significant excess returns, notably outperforming. Phase 2 (early September 2025 to end of May 2026): under the influence of capital factors and others, the sector's excess returns fell significantly until they were wiped out and turned negative. Phase 3 (June 2026): against the backdrop of a significant divergence between valuation and earnings, and influenced by factors such as easing capital factors, high earnings growth expectations (strong catalysis from sci-tech innovation equity, wealth foundation-building), and rebalancing of capital allocation, the brokerage sector once again generated phased excess returns. Phase 4 (early July 2026 to end of October 2026): high-frequency data weakened sequentially, the market gradually priced this in and digested it, and the sector's decline was relatively small, with valuations returning to low levels.
Review: capital factors and operating cooling came in succession, and the sector's annual performance was relatively weak, underperforming the broader market. Ranking the gains and losses of Shenwan secondary indices from the start of 2026 to the end of October, Securities II (Shenwan) ranked 69th out of 124, falling 21.7% during the period; compared with the performance of other major stock indices over the same period, the decline in the Securities II (Shenwan) index from the start of 2026 to the end of October was larger than that of the Shanghai Composite Index, CSI 300, and STAR 50.
Operations: The market environment shifted quarterly, and brokerages' operating resilience faced a major test. As brokerages' net asset scale continued to expand and financial investment asset scale steadily grew (CITIC and Guotai Haitong have already exceeded the trillion-yuan scale), the weight of investment income in brokerages' income statements increased significantly, making it crucial to balance short-term earnings stability. In a single-quarter volatile equity market environment, brokerages' single-quarter financial investment income declined sequentially. The top-tier brokerage cohort generally delivered better investment income performance. The top ten tier-one brokerages' overall investment income for the first three quarters of 2026 is estimated to have risen 12% year-on-year, while other listed brokerages' overall investment income is estimated to have fallen 9% year-on-year; the top ten tier-one brokerages' overall investment return rate for the first three quarters of 2026 is estimated at 2.6%, while other listed brokerages' overall investment return rate for the first three quarters of 2026 is estimated at 2.4%. Top-tier brokerages demonstrated stronger operating resilience in fee-based businesses (brokerage + investment banking + asset management), helping to smooth earnings volatility. In the first three quarters of 2026, the top ten tier-one brokerages' net fee and commission income rose 32% year-on-year, while other listed brokerages overall rose 20% year-on-year. In 2026 Q3, the top ten tier-one brokerages' net fee and commission income fell 2% quarter-on-quarter, while other listed brokerages overall fell 9% quarter-on-quarter.
Shareholders: Marginal Adjustment in Major Shareholders' Holdings of Listed Brokerages
Some long-term capital shareholders have begun to increase allocations. On October 9, New China Life Insurance announced that on September 29 it increased its holdings of Guotai Haitong H-shares by 9.9596 million shares through centralized bidding transactions in the secondary market, accounting for approximately 0.28% of Guotai Haitong Securities' issued H-share capital. After this equity change, New China Life Insurance and its concert parties together held 710 million Guotai Haitong H-shares, with their stake rising from 19.96% to 20.24%.
Policy: A Policy Package Rolled Out Around the Funding Side to Stabilize the Market and Expectations
Three major clues may require a re-examination of pricing: peer consolidation forging leaders, and wealth and international businesses accelerating iteration.
Key M&A and consolidation continue to land, and the industry landscape is gradually becoming clearer. SWHY (06806) and Orient Securities have achieved upward leaps into higher tiers by advancing key M&A and consolidation. From 2019 to the third quarter of 2026, listed brokerages' core fee-based business (brokerage + investment banking + asset management) net income has overall been on a path of increasing concentration. Key peer consolidation acts as a catalyst for raising industry concentration. Investment banking IPO business concentration is even higher, with the advantages of leading players notably clear. Capital resources are converging toward leading institutions, and return performance is expected to be more stable and superior.
Commission rate pressure has exceeded expectations, accelerating the push for wealth management transformation. Monthly trading peaks may have passed, and average daily stock and fund turnover has cooled sequentially; the "volume up, price down" characteristic continues, and small and medium-sized brokerages may face greater operating pressure. Under the new operating situation, leading institutions with a faster pace of wealth management transformation are expected to better smooth fluctuations in the retail wealth business line and fully seize incremental business opportunities. Leading institutions' "big asset management" business, comprising brokerage asset management plus participating/controlling public funds, contributes stable profit growth momentum.
RMB internationalization trend is clear, and international business development has entered a key window. Against the trend backdrop of RMB internationalization, Chinese enterprises promoting global expansion, and cross-border capital pursuing global asset allocation, both "investing in China" and "China investing" have opened up important incremental revenue expansion space for brokerages' international business. Leading institutions, by virtue of leading regional layout, superior talent teams, strong capital strength, advantageous brand effects, extensive client networks, and comprehensive compliance and risk controls, are expected to better seize incremental opportunities in international business. Capital-intensive business is an important source of revenue growth for brokerages' international operations, and conducting pre-research and pre-judgment of cross-market risks is key to steady expansion.
Risk warnings: 1) Domestic equity markets show a volatile trend, the securities industry faces operating pressure, and earnings growth slows; 2) market trading declines more than expected; 3) residents' allocation to equity assets increases less than expected; 4) brokerages' overseas business expansion progresses less than expected; 5) M&A and restructuring among brokerages advance less than expected.