Tracking of Hong Kong stock concepts | China's central bank establishes a 500 billion yuan swap facility solely for the stock market. Chinese securities firms sector may see an increase in valuation (with concept stocks attached)

Pan Gongsheng of the People's Bank of China stated that the People's Bank has for the first time created structural monetary policy tools to support the capital market. One of the tools is the mutual exchange of securities, funds, and insurance companies, supporting qualified securities, funds, and insurance companies to use their own bonds, stock ETFs, and constituents of the SSE 300 Index as collateral to exchange for high-liquidity assets such as national bonds and central bank bills from the central bank. This policy will significantly improve the funding acquisition and stock holdings of relevant institutions. The funds obtained by institutions through this tool can only be used for investing in the stock market. Pan Gongsheng revealed that the initial size of the mutual exchange operation is 500 billion yuan, and the scale may be expanded in the future depending on the situation. "I told Chairman Wu Qing that as long as this matter is handled well, we can add another 500 billion yuan in the future, or even a third 500 billion yuan. We are open." Guotai Junan International's report stated that the market's anticipation of exciting mergers and acquisitions should lead to a positive response in brokerage stock prices. The market expects significant increases in the stock prices of acquisition targets such as Galaxy Securities, China Securities Co., Ltd., and smaller brokerage firms. However, the stock prices of brokers such as Orient and Shenwan Hongyuan Group may lag behind due to being "left out." Regarding the merger arrangements of Guotai Junan and Haitong, the bank pointed out that the market is still waiting for the two parties to further announce the exchange ratio for the merger. In addition, the businesses of both parties overlap significantly. The integration of their post-merger businesses and asset reorganization plans will take time, and the loss situation of HAITONG INT'L remains a key concern. The bank pointed out that the merger of leading Chinese brokerage firms has kicked off. The merger of Guotai Junan and Haitong is the first merger and reorganization of leading brokerage firms since the implementation of the new nine regulations on national securities, and it is also the largest A+H dual-market absorption and merger in the history of China's capital markets, with a combined income of 59.1 billion yuan following closely behind 60.1 billion yuan of CITIC, but it will not be the final merger of leading brokerage firms. The market focus quickly shifted to "CICC+Galaxy" and "CITIC+China Securities Co., Ltd." Once the mergers are completed, the industry's competitive landscape will change. Industry insiders believe that the acquisition of smaller brokerage firms by leading local brokerages is expected to enhance the concentration of the securities industry, and the merger and reorganization between the two parties can leverage the brand advantages of Shenzhen state-owned assets and explore new growth engines. A series of policies recently encourage listed companies to engage in mergers and acquisitions to improve the quality of listed companies. It also encourages brokerage firms to actively engage in mergers and acquisitions to enhance their professional service capabilities. Kaiyuan Securities released a research report stating that the fundamentals of the brokerage industry will be under pressure in the first half of 2024, but the year-on-year decline in the second half of the year may narrow due to base factors, and FICC and cost reduction and efficiency improvement are expected to support the overall performance of the year. The valuation and institutional allocation of the brokerage sector are still at historical lows, with undervalued leading brokerage firms and targets with merger themes still being the industry's main focus. Relevant Chinese brokerage companies mentioned include: Haitong (06837), Guotai Junan (02611), China Galaxy (06881), CICC (03908), CITIC SEC (06030), Huatai (06886), etc.