China Securities Co., Ltd.: Post-holiday volume improves month-on-month, undervalued non-bank financials poised for recovery

China Securities Co., Ltd. released a research report stating that the securities sector has medium- to long-term allocation value, and recommended focusing on three main lines. The full-lifecycle regulation of property insurance company products has been further strengthened, which helps optimize the industry's competitive environment, and the industry's Matthew effect is expected to become more pronounced. Hong Kong-listed non-bank financial companies' interim results are improving while valuations remain low, and under a tight-balance landscape, the resonance between their fundamental improvement and valuation repair may present structural opportunities. In diversified financials, policy dividends and technology dividends are resonating, and it is recommended to closely follow the main line of "low valuation + high dividend yield + high growth." China Securities Co., Ltd.'s main views are as follows: Securities: The securities sector has medium- to long-term allocation value, and it is recommended to focus on three main lines Post-holiday trading volume rebounded month-on-month, mainly due to the calendar effect of capital returning, but it is still in a declining trend year-on-year, and the capital return is more reflected in stock position rebalancing. The market as a whole remains in a phase of contraction and consolidation. Margin financing and securities lending balances are at historical highs, but leverage levels are basically matched with market capitalization expansion, systemic leverage risk is controllable, and market risk appetite is still in a repair channel. The pace of equity financing is stable, and resources continue to tilt toward new quality productive forces. The current sector valuation is at a relatively low historical level and has a certain margin of safety. It is recommended to focus on securities firms with differentiated competitiveness in technology investment banking, leading securities firms in the large wealth management business and financial technology targets, and top-tier securities firms driven by accelerated internationalization to push ROE upward. Insurance: The full-lifecycle regulation of property insurance company products has been further strengthened, which helps optimize the industry's competitive environment, and the industry's Matthew effect is expected to become more pronounced On October 9, the National Financial Regulatory Administration issued the "Regulations on the Administration of Insurance Product Development for Property Insurance Companies" (hereinafter referred to as the "Regulations"). In recent years, with the rapid development of China's property insurance market, insurance product coverage has continued to expand and protection content has continued to enrich, but problems have also emerged, such as a high proportion of rider products but a lack of detailed rules, the management and application of industry model clauses and pure risk loss ratios needing strengthening, and the standards for company product evaluation, revision, cleanup, and deregistration needing further refinement. On the one hand, the "Regulations" set up a special chapter to regulate the development and management of rider products, listing specific circumstances in which development is prohibited, with the aim of guiding the industry back to the original purpose of rider product development, ensuring a clear product structure and clear responsibilities, and preventing clause conflicts, claims disputes, or operational compliance risks. In addition, the "Regulations" clarify that where there are industry model clauses or benchmark pure risk loss ratios, companies should in principle use them, and companies that do not use them must explain the reasons and differences in the feasibility report or actuarial report, thereby, while respecting companies' differentiated operating paths, strengthening the effectiveness of the use of model clauses and pure risk loss ratios through detailed requirements and promoting the improvement of product quality across the entire industry. Risk warning: Uncertainty in market price fluctuations, uncertainty in corporate earnings forecasts, and iterative technological updates.