Understanding the Market | Chinese brokerage stocks collectively surged after the central bank announced a reserve requirement ratio cut and interest rate reduction. Institutions claim there is a discrepancy between the profitability and valuation expectations of the brokerage sector
Chinese brokerage stocks rose collectively, influenced by the People's Bank of China's reserve requirement ratio cut and interest rate reduction. CICC rose by 3.69%, CITIC Securities rose by 2.88%, EB SECURITIES rose by 2.59%, and CSC rose by 2.24%. The central bank announced the optimization of monetary policy tools for the capital market, merging the quota to 800 billion yuan. A report from Shenwan Hongyuan shows that the net profit of brokerages in the first quarter increased by 83% year-on-year, and it is expected that there will be a gap between the profitability and valuation of the brokerage sector in the future, with a positive outlook
According to the Zhitong Finance APP, Chinese brokerage stocks have collectively surged. As of the time of publication, CICC (03908) rose by 3.69%, trading at HKD 14.6; CITIC Securities (06030) increased by 2.88%, trading at HKD 20; EB SECURITIES (06178) climbed by 2.59%, trading at HKD 7.12; and CSC (06066) rose by 2.24%, trading at HKD 9.13.
On the news front, Pan Gongsheng, Governor of the People's Bank of China, announced at a press conference on May 7 that the reserve requirement ratio would be lowered by 0.5 percentage points and the policy interest rate would be reduced by 0.1 percentage points. In addition, the central bank announced it would optimize two monetary policy tools to support the capital market, merging the quotas of the 500 billion yuan securities fund insurance company swap facility and the 300 billion yuan stock repurchase relending tool, resulting in a total quota of 800 billion yuan. Li Yunzhe, Director of the National Financial Regulatory Administration, stated that the scope of pilot projects for long-term investment by insurance funds would be further expanded to introduce more incremental funds into the market.
Shenwan Hongyuan released a research report stating that the net profit attributable to the parent company of the brokerage sector grew by 83% year-on-year and 19% quarter-on-quarter in the first quarter, with good performance in brokerage and proprietary trading; retail brokerage business made significant progress, and investment banking refinancing saw a substantial year-on-year increase driving positive revenue growth; investment returns improved significantly, with the expansion of financing business and reduction in funding costs jointly driving growth in net interest income; under high prosperity, there is a discrepancy in the profitability and valuation of the brokerage sector, and with policy efforts to stabilize the market and regulatory guidance on the future five years and 2035 industry landscape, the brokerage sector is viewed positively
