Guosen: Securities risk control welcomes comprehensive optimization, focusing on the development opportunities of high-quality securities companies.

Guosen released a research report stating that the risk control indicator system of securities firms has been comprehensively optimized, and the capital space of high-quality securities firms may be widened, maintaining a rating of "outperforming the market" for the industry. The bank believes that the current focus should be on two main themes under strict supervision and strict management, expecting further increase in industry concentration, deepening of institutional pricing power, strengthening of asset management indexation, and further increase in regulatory requirements. It is recommended to pay attention to high-quality securities firms with strong capital strength and institutional business strength, and to recommend leading comprehensive strength securities firms such as CITIC SEC (06030), Huatai (06886) and Industrial (601377.SH) which are expected to have strong business synergy expectations. Bottom reversal expectations for Orient (03958) are present. Guosen's main points are as follows: The risk control indicator system of securities firms is comprehensively optimized, and the capital space of high-quality securities firms may be widened. On September 20th, the China Securities Regulatory Commission released the revised "Regulations on the Calculation Standards for Risk Control Indicators of Securities Companies," with major changes including: 1) Encouraging securities firms to allocate high-quality equity assets, reduce the capital occupation of equity assets, and increase the liquidity conversion rate of equity assets. The calculation standards in the market risk capital reserve form have been adjusted: the components of the CSI 500 Index have been added; the calculation standards for the components of the SSE 180, SZSE 100, and Shanghai and Shenzhen 300 have been reduced from 10% to 8%; and the calculation standards for general listed stocks have been reduced from 30% to 25%. In the liquidity coverage rate calculation form, the components of the CSI 500 Index and index ETFs have been added, and the conversion rate for the components of the SSE 180, SZSE 100, and Shanghai and Shenzhen 300 indexes and index ETFs has been raised from 40% to 50%. 2) Encouraging securities firms to engage in market making businesses and reduce the capital occupation of market making business risks. 3) Encouraging securities firms to strengthen business compliance management, reduce the calculation coefficients of risk capital for high-quality securities firms, total assets calculation coefficients for on-balance and off-balance sheet assets, and increase the available net stable funding conversion rate. For three consecutive years, class A ratings of AAA or above are 0.4 (originally 0.5); for three consecutive years, class A ratings are 0.6 (originally 0.7), class A is 0.8, class B is 0.9, class C is 1, and class D is 2. Total on-balance and off-balance sheet assets calculation coefficients: for three consecutive years, class A ratings of AAA or above are 0.7, for three consecutive years, class A ratings are 0.9, and the rest are 1. 4) Restricting securities firms' derivative and non-standard investment businesses, and increasing the corresponding risk capital occupation. The risk capital calculation standards for stock index futures, equity swaps, and sold options have been raised from 20% to 30%. The risk capital calculation standards for single asset management/aggregate asset management investing in non-standard assets have been raised from 0.8%/3% to 3%/5%. 5) The risk control indicator system is more comprehensive, guiding securities firms to participate in public REITs business in a more standardized manner. The proportion of securities firms' investment assets has increased, and the "Regulations" guide the asset allocation direction of securities firms. The proportion of investment assets of securities firms has increased to over 52%, and with the release of this "Regulations," the direction of equity asset allocation and market making businesses is encouraged, while non-standard investments and derivative businesses are restricted, resulting in potential changes in the asset structure of securities firms. August Review: Market turnover continued to decline. Margin trading balances continued to decrease. (1) In terms of brokerage business, the average daily trading volume of A shares in August was 594.244 billion yuan, down 8.8% month-on-month and 27.8% year-on-year. (2) In terms of investment banking business, there were 9 IPOs in August, raising a total of 5.3314 billion yuan, up 20.0% month-on-month; the amount of follow-on financing in August was 8.3857 billion yuan, down 57.3% month-on-month; the underwriting scale of corporate bonds and company bonds in August was 341.1 billion yuan, down 12.1% month-on-month. (3) In terms of proprietary trading business, the Shanghai Composite Index fell by 0.97%, the Shanghai and Shenzhen 300 Index fell by 3.51%, the ChiNext Index fell by 6.38%, and the CSI All Bond Index fell by 0.15%. (4) Looking at the margin trading balances that reflect market risk appetite, the daily average margin trading balance in August was 1,413.335 billion yuan, down 2.77% month-on-month. Risk Warning: Economic recovery is slower than expected; Market competition intensifies; Innovation progress is slower than expected, etc.