Sinolink: Positive policies + loose liquidity + improved fundamentals catalyze long-term capital entering the market, benefiting the valuation and performance of the securities industry sector.

Sinolink released a research report stating that the landing of a long-term capital market access plan is conducive to the long-term stable development of the capital market. With positive policies, loose liquidity, and improved fundamentals as catalysts, it is favorable for the valuation and performance enhancement of securities firms. It is recommended to focus on securities firms that benefit more from the recovery of the equity market, such as those with strong beta businesses (equity investment elasticity + trading elasticity) and securities firms with advantages in issuing and managing equity asset management products. Event: Recently, the Central Financial Office, the China Securities Regulatory Commission, the Ministry of Finance, the Ministry of Human Resources and Social Security, the People's Bank of China, and the China Banking and Insurance Regulatory Commission jointly issued the "Implementation Plan for Promoting the Entry of Medium and Long-term Capital into the Market", focusing on guiding commercial insurance funds, national social security funds, basic old-age insurance funds, enterprise (occupational) annuity funds, and public funds to further increase their market entry efforts. Sinolink's main points are as follows: Insurance funds: Increase the A-share investment proportion and stability of commercial insurance funds. On the existing basis, guide large state-owned insurance companies to increase the scale and actual proportion of A-share (including equity fund) investments. 1) State-owned insurance companies are subject to comprehensive performance assessment for a period of more than three years, with the net asset return rate accounting for not more than 30% of the assessment weight in the current year and not less than 60% in the three to five-year cycle. 2) Promote the landing of the second batch of long-term stock investment pilot projects for insurance funds and gradually expand the range of participating institutions and the scale of funds. The first pilot project was jointly initiated by China Life and New China, with the establishment of the 50 billion yuan Honghu Fund. As of September 30, 2024, the fund had a paid-in capital of 32.01 billion yuan, mainly investing in listed companies with significant competitive advantages, sound governance structures, and good commercial profit models, buying and holding them for the long term. A simple calculation shows that if the equity ratio of the insurance industry increases by 1%, considering only the existing increase, it is estimated to bring more than 300 billion yuan of incremental funds to the stock market over the year. With the influx of new insurance premiums and the re-allocation of mature assets, the amount of capital entering the market will be higher. If the proportion of high-dividend allocation in stocks + equity funds increases by 10%, the estimated incremental funds for high-dividend industries will be over 400 billion yuan. Social security/basic old-age insurance funds: Optimize investment management mechanisms Gradually increase the proportion of stock assets in the national social security fund, and further expand the scale of entrusted investment of basic old-age insurance funds in regions under certain conditions. Specify the long-term performance assessment mechanism for the national social security fund for over five years and the basic old-age insurance fund investment operation for over three years, supporting the National Social Security Fund Council in fully leveraging its professional investment advantages. Enterprise/occupational annuity funds: Improve market-oriented investment operations Accelerate the issuance of guidance on performance assessment for over three years. Gradually expand the coverage of enterprise annuities, support qualified employers to explore opening up individual investment choices for enterprise annuities, and encourage enterprise annuity fund managers to conduct differentiated investments. Public funds: Increase the scale and proportion of equity funds Strengthen classification regulatory constraints, optimize product registration mechanisms, guide and urge public fund managers to steadily increase the scale and proportion of equity funds, establish a mechanism linking the interests of fund managers, fund managers, and investors, and enhance investor satisfaction. Promote the implementation of rules for private securities investment funds and lawfully expand the types and investment strategies of private securities investment funds. Optimize the investment ecology of the capital market Encourage listed companies to increase their share buyback efforts and implement a policy of distributing dividends multiple times a year. Promote listed companies to increase the use of share buybacks and holdings-to-loan instruments. Allow public funds, commercial insurance funds, basic old-age insurance funds, enterprise/occupational annuity funds, and bank wealth management products to participate in private placements of listed companies as strategic investors. In terms of participating in new stock subscriptions, listed company private placements, and stake acquisition standards, bank wealth management products, insurance asset management, and public funds receive equal policy treatment. Further expand the scale of exchange facilities for securities, funds, and insurance companies. Risk warning: 1) Downward trend in the equity market; 2) Significant interest rate reduction; 3) Risks of capital market reform falling short of expectations.