Zhongtai: Five main logical supports, the layout of securities firms in need of a rise is just right

Zhongtai released a research report stating that, from the perspective of market trading characteristics, since June 2025, the A-share market has gradually shifted from a stock market to an incremental market. With the increase in trading activity, the overall market valuation center has generally and trendingly risen, sectors have transitioned from rotation to overall increase, and the money-making effect has begun to show. It is wise to focus on: 1) Top securities companies; 2) Leading financial technology companies that benefit fully from active market trading. Zhongtai's main points are as follows: Logic 1: In an incremental market, grasp the opportunities for relative returns in the non-bank sector. From the perspective of market trading characteristics, since June 2025, the A-share market has gradually shifted from a stock market to an incremental market. With the increase in trading activity, the overall market valuation center has generally and trendingly risen, and sectors have transitioned from rotation to overall increase, showing the potential for making money. Yesterday (July 22, 2025), the trading volume in the three regions reached 1.93 trillion yuan, close to the integer mark of 2 trillion yuan, with a change from the previous trading day of 11.7%; the margin trading balance in the three regions was 1.9 trillion yuan, with a change from the previous trading day of 0.8%; and margin buy-in balance saw a change of 7.6% from the previous trading day. Investors need to pay attention to the opportunities for relative returns in the non-banking sector. Logic 2: Securities firms' performance in the first half of 2025 is expected to increase by over 70%, better than expected. Among the 29 securities firms that have announced their net profit for the first half of 2025, the overall announced net profit growth rate is 75.02%, of which the second quarter of 2025 saw a year-on-year net profit growth of 20.66%. These 29 securities firms with announced net profits accounted for 44% of the industry's net profit in 2024. Based on the growth rate of net profit, the top five companies are Huaxi (1189.5%), Guolian Minsheng (1183.0%), Guosen Financial Holding Inc. (315.5%), Harbin Hatou Investment (233.1%) and Northeast (225.9%). According to the set net profit, the top five companies are Guotai Haitong (15.62 billion yuan, with a non-deductible growth rate of 57%), China Galaxy (6.58 billion yuan, with a year-on-year expected increase of 50%), Guosen (5.16 billion yuan, with a year-on-year expected increase of 64%), China Securities Co., Ltd. (4.5 billion yuan, with a year-on-year expected increase of 57.5%) and Shenwan Hongyuan Group (4.3 billion yuan, with a year-on-year expected increase of 102.1%), mainly due to the continued active trading in the market driving the growth of brokerage and equity proprietary businesses. Logic 3: Stablecoin catalyst, virtual asset license upgrade, and business innovation. Securities firms are expected to benefit fully from the catalyst of stablecoins at both the business and valuation ends. Hong Kong's Stablecoin Ordinance will come into effect on August 1, and Hong Kong's Monetary Authority will release a summary of the Stablecoin Issuer Rules next week. The Shanghai State-owned Assets Supervision and Administration Commission held a central group study meeting on July 10 to study the development trends and coping strategies of cryptocurrencies and stablecoins. Chinese securities firms such as GUOTAI JUNAN I and Tianfeng have upgraded their virtual asset trading licenses in Hong Kong, bridging the gap in "trading-custody-derivatives issuance" full-chain services, with the potential for growth in cryptocurrency trading commissions, cross-border settlement of stablecoins, RWA issuance, etc. Logic 4: H-shares leading, A-shares lagging, significant shrinkage in AH price difference of securities firms. Since April 7, 2025, as the turning point of this round of market trends, up to now (July 22, 2025), among the A-share and H-share dual-licensed securities firms, the H-share price has increased by 73.9%, while the A-share securities firms have seen a change of only 22.0%, with a difference of 51.9% between the two, indicating a significant shrinkage in the AH price difference. The top five securities firms with the largest differences in growth rates are Shenwan Hongyuan Group, GF SEC, Orient, CICC, and Guolian Minsheng. On one hand, this is related to the better trend in Hong Kong stock market, and on the other hand, the current average PB ratio of H-share securities firms is only 1.0 times, still lower than the 1.5 times PB ratio of A-share securities firms. Logic 5: Differences between this round of securities block market trends and the market trend on September 24, 2024. 1) From "mad bull" to "slow bull", incremental funds continue to enter the market amidst market hesitancy, investors are gradually shifting from a trading-oriented strategy mindset to a holding-oriented strategy mindset, the upward slope of the securities sector may be slowing down but could be more sustainable; 2) "Anti-overwork" as a long-term macro narrative, the market may have overestimated its short-term impact and underestimated its long-term effects, which could help to lever the long-term logic of industry profit recovery, driving the market's valuation center back up; 3) The implementation of the "Action Plan to Promote the High-quality Development of Public Mutual Funds" may bring more incremental funds to be allocated to underrepresented non-bank sectors at the market sentiment turning point, thus benefiting securities firms more. Among the top ten holdings of active equity funds of ordinary stock, equity mixed, and flexible allocation types according to Wind Fund, the top ten companies with the highest market value at the end of the period are HuataiA, CITIC SECA, East Money InformationA, Guotai HaitongA, China GalaxyA, SoochowA, GF SECA, HuataiH, China GalaxyH, and CICCH, all with varying degrees of increase in holdings, but overall still underrepresented. Risk warning: Significant fluctuations in the equity market, risks of delayed research report updates.