Ten thousand securities: the securities industry still has room for incremental business and it is suggested to focus on small and medium-sized securities firms with prominent sub-tracks.

Wanlian Securities released a research report stating that looking into the future, the securities industry still has a broad space for incremental business. In the process of comprehensively deepening the reform of the capital market and promoting the high-quality development of the industry, top securities firms are expected to further optimize and strengthen through mergers and acquisitions, as well as increasing leverage. Small and medium-sized institutions may also receive more specific policy support and guidance in their differentiated and characteristic development. The performance of securities firms is expected to continue to improve, along with valuation recovery. Specific recommendations include focusing on undervalued targets among the top securities firms, potential beneficiaries of mergers and acquisitions, and smaller securities firms that excel in specific segments. Wanlian Securities' main points are as follows: Under the guidance of differentiated and characteristic development, the industry structure may accelerate optimization. Chairman Wu Qing mentioned that top institutions need to further enhance their awareness and ability to integrate resources, make good use of mergers and acquisitions mechanisms and tools, and strive to establish several top institutions with significant international influence during the "15th Five-Year Plan" period. Chairman Wu Qing also emphasized that being a first-class investment bank is not exclusive to top institutions. Small and medium-sized institutions should also leverage their strengths, develop in niche areas, focus on special client groups and key regions, and strive to build "small but fine" boutique investment banks and specialized service providers. Regulatory policies will strengthen differentiated supervision, support excellence while restricting inferior quality, loosen restrictions appropriately for high-quality institutions, further optimize risk control indicators, moderately open up capital space and leverage limits, explore differentiated supervision for small and medium-sized securities firms and foreign securities firms in terms of classification evaluation and business access, and promote specialized development. The firm believes that: 1) Since the proposal in 2024 to support top institutions through mergers and acquisitions and organizational innovation in order to optimize and strengthen, the industry has seen frequent cases of mergers and acquisitions, involving top institutions including Guotai Junan merging with Haitong, CICC planning to merge with Dongxing and Cinda, among others. With further policy emphasis, related mergers and acquisitions are expected to accelerate; 2) Compared to well-known overseas investment banks, current top securities firms in China have relatively low leverage ratios. Moderating leverage restrictions will help improve their capital utilization and ROE levels, moving towards becoming top international investment banks; 3) Small and medium-sized securities firms are expected to benefit from more policy support and guidance in their differentiated and characteristic development. Supporting innovation, promoting internationalization, and having a broad business development space. Chairman Wu Qing pointed out that the securities industry should continuously innovate in financial products, services, and organizational structures on the basis of controllable risks, better meeting the needs of various investors and markets. He also mentioned working with industry associations to facilitate innovation pilot projects in the securities industry. Chairman Wu Qing also highlighted the need to enhance cross-border financial comprehensive service capabilities, with eligible institutions steadily advancing internationalization and positioning along the "Belt and Road" initiative. In the context of economic and demographic structural transformation, downward pressure on interest rates, and changes in the international financial landscape, the securities industry has vast potential business opportunities. It is anticipated that more concrete measures to support innovation and internationalization will be introduced in the future, accelerating the exploration of potential incremental businesses by securities firms and catalyzing performance growth. Risk factors: Policy implementation falling short of expectations; tightening regulations; increasing industry competition; geopolitical risks; and macroeconomic recovery falling short of expectations.