Shenwan Hongyuan Group: It is expected that the performance of securities firms in the third quarter will continue to grow at a rate of over 50% compared to the same period last year. Top securities firms' overseas businesses maintain high growth.

Shenwan Hongyuan Group released a research report stating that it is expected that the net profit of the brokerage sector in 3Q25E will continue to grow by over 50% year-on-year in the context of increased market trading volume compared to 1H25. In terms of market trading performance, the daily average stock fund turnover on the Shanghai and Shenzhen North markets in 3Q25 was 2.04 trillion yuan, a year-on-year increase of 153% and a quarter-on-quarter increase of 37%. The daily average margin balance in 3Q25 was 2.12 trillion yuan, a year-on-year increase of 49% and a quarter-on-quarter increase of 17%. In the Hong Kong stock market, the average daily trading volume (ADT) was 255 billion Hong Kong dollars from the beginning of the year to now, a 93% increase compared to 2024; there have been 71 new listings on the Hong Kong stock market from the beginning of the year to now, raising a total of 187.3 billion Hong Kong dollars in IPO funds (compared to 88 billion Hong Kong dollars for the entire year in 2024), with 25 new listings in the 3Q25 Hong Kong stock market, raising a total of 77.3 billion Hong Kong dollars, a year-on-year increase of 83%. It is expected that the leading brokerage firms' overseas business will maintain high growth. Shenwan Hongyuan Group's main points are as follows: Investment business: Stock market performance is impressive, while the bond market weakness may have a certain impact on investment income (slightly decreased self-operated income in 3Q25). Stock market: Important stock index in the equity market, including the Shanghai and Shenzhen 300 Index, the ChiNext Index, and the ChiNext 50 Index, all hit new highs in 3Q25 with increases of 17.90%, 50.40%, and 49.02% respectively. Bond market: The 10-year Treasury bond yield rose to 1.86% during the reporting period, with the ChinaBond Composite Bond Index (Net) decreasing by 1.78% (compared to an increase of 1.29% in 2Q25). Despite most brokerage firms increasing directional equity exposure in their self-operated portfolios, the decline in the bond market resulted in a slight decrease in brokerage self-operated income in 3Q25E compared to the previous quarter when both stocks and bonds saw increases. It is expected that the total investment income for the brokerage sector in 3Q25E will be 58 billion yuan, a year-on-year increase of 7% and a quarter-on-quarter decrease of 5%, contributing 40% to the main revenue. Brokerage & Margin Trading Business: Continuation of the trend of increasing volume and decreasing prices, with expectations of increased market liquidity. Market trading performance: The daily average stock fund turnover on the Shanghai and Shenzhen North markets in 3Q25 was 2.04 trillion yuan, a year-on-year increase of 153% and a quarter-on-quarter increase of 37% (the daily stock trading volume in July-September continued to rise month by month), with the daily average margin balance in 3Q25 at 2.12 trillion yuan, a year-on-year increase of 49% and a quarter-on-quarter increase of 17%. New account openings: The Shanghai Stock Exchange disclosed that there were 2.9372 million new A-share accounts opened in September 2025, an increase of 61% year-on-year and 11% quarter-on-quarter, marking the fourth consecutive month of quarter-on-quarter growth. Market trading sentiment has not yet become overheated, and the shift of household deposits into the market is still in the early stages. It is expected that the current trading level will be sustainable, with brokerage sector brokerage business revenue projected to be 43.7 billion yuan in 3Q25, a year-on-year increase of 111% and a quarter-on-quarter increase of 43%, contributing 30% to the main revenue (the reason for the lower growth rate in brokerage business revenue compared to the market trading volume is that the commission rate is still in a downward trend). Investment Banking Business: With the low base, A-share equity financing has significantly rebounded, and the audit process has accelerated with the market recovery. Issuance side: According to the issuance date calculation, the IPO scale for A shares in 3Q25 was 38 billion yuan, a year-on-year increase of 148% and a quarter-on-quarter increase of 77%; the scale of refinancing (private placements + rights issues + preference shares) was 74 billion yuan, a year-on-year increase of 189% and a quarter-on-quarter decrease of 87% (the main reason for the quarter-on-quarter decline is the 520 billion yuan raised through private placements by the four major banks in June); the underwriting scale for brokerage firms in 3Q25 was 4.6 trillion yuan, a year-on-year increase of 19% and a quarter-on-quarter increase of 9%. Audit side: The Listing Committee reviewed a total of 32 IPO applications in 3Q25 (compared to 22 in 2Q25). It is expected that the investment banking revenue for the brokerage sector in 3Q25 will be 9.2 billion yuan, a year-on-year increase of 19% and a quarter-on-quarter increase of 4%. Asset Management Business: New equity funds have significantly rebounded, ETF scale is rapidly growing, brokerage private fund management scale is recovering, and brokerage asset management business revenue remains relatively resilient. Public Offering Business: In 3Q25, the market saw the establishment of 209.3 billion shares of equity-oriented public funds, a year-on-year increase of 304% and a quarter-on-quarter increase of 43%. According to Wind statistics (excluding ETF linked funds), the market value of equity mixed funds at the end of 3Q25 was 8.5 trillion yuan, a 12% increase compared to the end of 2Q25; the ETF scale saw a significant increase with the ETF market value reaching 5.6 trillion yuan at the end of 3Q25, a 31% increase compared to the end of 2Q25. Brokerage Private Fund Management: According to statistics from the AMAC, as of the end of July 2025, the AUM of brokerage firms and their asset management subsidiaries totaled 5.8 trillion yuan. With individual investors accelerating their entry into the market through funds and the resurgence of equity funds driven by policies, it is expected that the asset management business revenue for the brokerage sector in 3Q25E will be 11 billion yuan, a year-on-year decrease of 2% and a quarter-on-quarter decrease of 1%. Active trading and IPO performance in the Hong Kong stock market, focusing on the performance incremental brought by international business. The research report estimates that the net profit of the brokerage sector in 3Q25E will continue to grow by over 50% year-on-year in the context of increased market trading volume compared to 1H25; it is expected that the brokerage sector in 9M25E (with 42 listed brokerage firms) will achieve a net profit attributable to the parent company (for Guotai Haitong, it will be net profit attributable to the parent company excluding non-recurring items) of 157 billion yuan, a year-on-year increase of 52%, of which the net profit attributable to the parent company in 3Q25E for the brokerage sector is estimated to be 61 billion yuan, a year-on-year increase of 54% and a quarter-on-quarter increase of 16%. Under the triple driving forces of loose liquidity, favorable policies, and the mismatch between performance and valuation, it is recommended to focus on opportunities for the brokerage sector. The report recommends three investment themes: 1) Strongly recommend leading institutions with comprehensive strength benefiting from the optimization of industry competition, such as GF SEC, CITIC SEC, and Guotai Haitong; 2) For brokerages with greater performance elasticity, consider East Money Information and CMSC; 3) For targets with strong international business competitiveness, consider China Galaxy and CICC. Risk Warning: Economic recovery lower than expected; Mergers and acquisitions of brokerages proceed slower than expected; Risk of impairment of goodwill or other assets due to mergers and acquisitions for some brokerages.