Guotai Junan: Market trading remains active and is expected to support the performance of brokerage firms. Some leading brokerage firms may achieve a certain improvement in profitability.

Guotai Haitong released a research report stating that the continued active trading in the market is expected to support securities firms' performance. They recommend leading securities firms with significant improvement in performance and potential for mergers and acquisitions. In a volatile interest rate environment, the performance of leading securities firms is more certain. With the low base in Q1 and increased trading volume of stock funds, some leading securities firms are expected to achieve improved profitability with certainty. Guotai Haitong's views are as follows: 1) In March, the scale of newly issued funds increased significantly compared to the previous month, while achieving net purchases. 2) In March 2025, the total assets of publicly offered funds in the market amounted to 32.56 trillion yuan, an increase of 0.73% month-on-month. Specifically, the total fund shares in the market were 30.32 trillion shares, up by 0.51%; the average net asset value per unit was 1.07 yuan, up by 0.22%. Among them, the total share of equity funds was 6.33 trillion shares, an increase of 0.87%, and the total share of bond funds was 9.58 billion shares, up by 0.86%. The share of money market funds remained unchanged at 13.61 billion shares. 3) In March 2025, the retention rate of net assets for existing funds in the market was 100.08%. Specifically, the retention rate of net assets for existing equity funds was 100.38%, and for existing bond funds was 100.18%. Resident risk appetite slightly rebounded, with an increase in index and mixed stock fund shares. 1) In March 2025, the share of varieties with a high proportion of individual investors rebounded, including a 7.24% increase in the share of enhanced index funds and a 2.68% increase in the share of balanced mixed funds. In addition, the share of medium and long-term pure bond and mixed bond secondary funds, which are more popular among institutional investors, also showed a slight increase month-on-month, with a rapid growth in REITs fund shares. 2) Investor risk appetite slightly rebounded, with resident funds flowing into index and mixed products, while resident assets continued to flow into insurance and wealth management institutions. Furthermore, funds with a higher proportion of institutional investors also saw a slight increase in shares. A preliminary draft of industry reform plan has been formed, resonating with policy, technological, and demand changes. 1) On January 23, 2025, at a press conference held by the State Council Information Office, Wu Qing, the chairman of the China Securities Regulatory Commission, stated that based on the deployment of the Central Political Bureau Meeting, the CSRC had formulated a preliminary draft of the industry reform plan for the public offering fund industry, aiming to address issues such as short-term operation and inadequate investor returns. 2) Under policy requirements, fund companies are actively promoting industry reform. In terms of products, index funds have seen a significant increase in scale, while index products that can achieve certain excess returns are also supported by policies and markets to meet the demand of investors with corresponding risk preferences, with the concentrated issuance of the CSI A500 Index Enhanced Fund. In terms of channels, the reform of direct sales channels by fund companies is being promoted, with many small and medium-sized fund companies temporarily suspending their own apps due to fee competition. In terms of operations, with the launch of DeepSeek's large model, fund companies are continuously advancing in foundational work such as computing power, self-developed AI models, and data governance. They are also strengthening the integration of research and investment to improve research efficiency, lengthening assessment cycles to increase long-term returns. Risk warning: Large fluctuations in the equity market.