China Securities Co., Ltd.: The first quarter performance of ten securities firms is expected to increase. Focus on the current configuration cost-effectiveness of the sector.

China Securities Co., Ltd. issued a research report stating that since April, the securities sector has experienced a brief correction, and the cost-effectiveness has once again become prominent. China Securities Co., Ltd. is optimistic about the sector's valuation recovery momentum, with the core logic lying in the resilient performance securing a safe margin, policy and macroeconomic improvements forming a dual catalyst, and low valuation levels opening up upward space. In terms of insurance, in the long run, insurance companies need to promote the diversification of liability-end product structures, such as developing dividend insurance and health insurance, to reduce the cost of rigid liabilities. The logic of dividend asset allocation is expected to continue, potentially enhancing the long-term investment performance of insurance companies. The main views of China Securities Co., Ltd. are as follows: Securities: High elasticity growth in net profit in the first quarter under a low base year, leading to expectations of valuation adjustment. As of April 12, 10 listed securities firms have disclosed their first quarter performance forecasts for 2025, with two securities firms achieving positive revenue growth and eight securities firms achieving over 30% year-on-year growth in net profit. The growth in the performance and profits of listed securities companies is partly due to the impact of the low base effect of self-operated in the same period last year, and the growth in quarterly stock trading volumes has driven the growth of agency trading revenue. Since April, after a brief correction, the securities sector's cost-effectiveness has once again become prominent. We are optimistic about the sector's valuation recovery momentum, with the core logic lying in: the resilience of performance securing a safe margin, policy and macroeconomic improvements forming a dual catalyst, and low valuation levels opening up upward space. Insurance: On April 8, the China Banking and Insurance Regulatory Commission issued the "Notice on Adjusting the Relevant Matters of Asset Allocation Ratio of Insurance Funds for Equity-type Assets." The "Notice" raised the investment limits for equity assets of insurance companies with comprehensive solvency adequacy ratios above 150%-200%, 250%-300%, and over 350% by 5 percentage points, expanding their equity investment space. In the background of declining long-term interest rates and insufficient supply of high-quality non-standard assets, it is reasonable for insurance funds to increase the allocation of equity assets to enhance long-term returns. A high dividend strategy may become an important allocation direction. In the long run, insurance companies need to promote the diversification of liability-end product structures, such as developing dividend insurance and health insurance, to reduce the cost of rigid liabilities. The logic of dividend asset allocation is expected to continue, potentially enhancing the long-term investment performance of insurance companies. Hong Kong market and Hong Kong Stock Exchange views: Since April, the Hong Kong stock market has experienced some adjustments, with focus on subsequent market recovery. Since April, the Hong Kong stock market has experienced some adjustments, with the Hang Seng Index down by 9.54% and the Hang Seng Technology Index down by 9.16%. Overall, the Hong Kong market has underperformed the MSCI World Index by -4.34%. As of April 11, the total market value of the Hong Kong stock market was HK$36.62 trillion, a decrease of -6.85% from the end of March; in terms of funds, since April, trading activity in the Hong Kong stock market has increased slightly, with the ADT being HK$3.6185 trillion, an increase of 18.22% month-on-month. First-quarter performance outlook for securities firms: Ready to go, with expected valuation recovery. Since April, the securities sector has experienced a brief correction, with the cost-effectiveness once again becoming prominent. We are optimistic about the sector's valuation recovery momentum, with the core logic lying in: the resilient performance securing a safe margin, policy and macroeconomic improvements forming a dual catalyst, and low valuation levels opening up upward space. Performance side: High elasticity growth in net profit under a low base year, leading to expectations of valuation adjustment. As of April 12, 10 listed securities firms have disclosed their first quarter performance forecasts for 2025, with two securities firms achieving positive revenue growth and eight securities firms achieving over 30% year-on-year growth in net profit. The growth in the performance and profits of listed securities companies is partly due to the impact of the low base effect of self-operated in the same period last year, and the growth in quarterly stock trading volumes has driven the growth of agency trading revenue. According to Wind's statistics, the average daily turnover of A-shares in the first quarter of 2025 reached 1.5245 trillion yuan, a year-on-year increase of 70.27%. The average daily turnover in January/February/March was 1205.480/18401.62/15275.67 billion yuan, a year-on-year increase of +63.19%/+92.32%/+50.41%. Wealth management-oriented securities firms such as Huatai, China Galaxy, China Securities Co., Ltd., have all achieved over 50% profit growth. Policy aspect: Expectations of reserve ratio cut and interest rate cut by the central bank may improve liquidity and market sentiment, combined with policies to boost consumption to strengthen economic recovery expectations, jointly boosting market trading activity and improving profit prospects. Since March, the central bank has repeatedly mentioned "selective reserve ratio cuts and interest rates." If the interest rate and reserve ratio cut policy is implemented, the improvement in market liquidity and the decline in financing costs are expected to boost the level of market activity, combined with policies to stimulate consumption to promote economic recovery expectations, the securities sector will benefit from the increase in risk preferences and the strengthening of trading sentiment, potentially leading to marginal recovery in the overall business chain and profit capabilities. Macro aspect: The narrowing of the year-on-year decline in CPI in March releases a positive signal, with a clear effect on boosting consumption. In March, the Consumer Price Index (CPI) year-on-year decreased by 0.1%, a decrease of 0.6 percentage points compared to the previous month. Looking at the marginal changes, further evidence of policy effects to boost consumption demand is shown, with core CPI rising significantly, up by 0.5% year-on-year. The securities sector is highly linked to the macro economy and capital markets, and driven by improving economic expectations, it is expected to become a core beneficiary of the market's renewed risk preference. Valuation level: Adequate upward space, limited downward space. As of April 11, the PB valuation of securities (SW) sector based on the consensus estimates by Wind is approximately 1.33 times, positioning it at a moderate level over the past five years. From a safety margin perspective, based on the predicted profit level, during the period of low valuation of the securities sector from September 2022 to August 2024, the PB value fluctuated in the range of 1.0-1.2 times, with the industry's operating and trading environment significantly better than at that time, therefore, the downward space is relatively limited. External environment: Tariff policies may bring inflation risks, and the Federal Reserve's stance on interest rate cuts is cautious. Several Federal Reserve officials have frequently spoken out, emphasizing that controlling inflation is the current priority and expressing vigilance about the persistent price pressures that tariffs may bring, implying that they are not in a rush to cut interest rates. On April 10, Eric Rosengren, President of the Boston Federal Reserve, stated that despite...The Federal Reserve may lower interest rates later this year, but tariff-driven inflation may delay further rate cuts. On the same day, Dallas Federal Reserve President Loretta expressed a similar view, believing that temporarily maintaining stable interest rates is the best choice while waiting for the economic impact of tariffs to become clearer. Meanwhile, data released by the U.S. Bureau of Labor Statistics on April 10 showed that the U.S. Consumer Price Index (CPI) rose by 2.4% year-on-year in March, below the market's expectations of 2.5%; core CPI rose by 2.8% year-on-year, the smallest increase since March 2021. The moderate growth in CPI data suggests that inflation pressures have eased somewhat, but the Federal Reserve may still need more time to assess the long-term impact of external factors such as tariffs on the economy, which could further influence its future monetary policy direction.Bonjour, comment vas-tu aujourd'hui?