Donghai Securities: Policies are driving A-share valuation system towards value-driven. Focus on large securities firms for stock allocation opportunities.

East Sea Securities released a research report stating that in the background of strict supervision and regulation, future comprehensive reforms in investment and financing will become the main driving force for the long-term development of the capital market. The effectiveness and direction of building first-class investment banks will not change. It is recommended to focus on the logical main lines of mergers and acquisitions, transformation of wealth management, innovative licensing expansion, and ROE improvement, and to pay attention to opportunities in large securities firms with strong capital strength and stable business operations. East Sea Securities' main points are as follows: Event The government work report of the National Two Sessions in 2026 has been released, pointing out the development direction of the capital market in the future. The economic theme press conference of the Fourteenth National People's Congress has been held, further explaining the effectiveness of capital market reform and the next goals. In the year of the start of the "Fifteenth Five-Year Plan," the government work report clearly defines the positioning and development direction of the capital market. Deepening the reform of the ChiNext: Expanding the system and improving efficiency, strengthening the capital support for innovative enterprises Deepening the reform of the ChiNext is a key focus of the capital market in 2026, with the core of the reform being "highlighting positioning, replicating experience, and comprehensive supervision." Firstly, more inclusive listing standards will be set up, weakening traditional profit constraints, covering light-asset high-growth enterprises in new consumption, modern service industries, and solving the pain points of high-quality innovative enterprises in listing difficulties. Secondly, fully replicate the mature experience of the Science and Technology Innovation Board, introduce an IPO pre-review mechanism and policies for additional capital injection by old shareholders, significantly shorten the review period and ease the early funding pressure on enterprises. Finally, build a full-chain system from recommendation selection to continuous supervision, strengthen intermediaries' responsibilities, and curb "sick applications." This will promote the transformation and extension of the ChiNext from solely supporting hard technology to serving a wide range of economic activities, complementing and accelerating the formation of innovative capital with the Science and Technology Innovation Board. Optimizing refinancing mechanism: Smooth capital circulation, empowering mergers and acquisitions and industrial upgrading The optimization of the refinancing mechanism marks the shift of A-shares from a simple financing channel to an engine for industrial integration, focusing on increasing inclusiveness, featuring a clear orientation of "assisting the best and supporting technology," and strict supervision throughout the process. Policies will optimize strategic investment identification, promote shelf issuance, and improve the lock-in price for additional capital injections, significantly reducing the time and friction costs of mergers and acquisitions, helping leading enterprises carry out vertical integration and technological iteration of the industrial chain. Simultaneously, breaking down sector barriers and expanding the recognition standards for science and technology attributes to the main board, relaxing restrictions on research and development funds, and providing precise support to key core technology companies. While facilitating, regulators will crack down on "fraudulent" financing and illegal changes in use, establish a mechanism for survival of the fittest. This combination of "protection and pressure" will reverse negative market expectations, drive funds to high-yield areas, activate the mergers and acquisitions market, and promote a virtuous cycle of "technology-industry-finance." Intensified supervision to prevent risks: Improving the stability mechanism of the market, accelerating institutional reforms Intensified supervision and risk prevention are the cornerstones of ensuring the stability and long-term development of the capital market. On one hand, removing obstacles for long-term funds like social security and insurance to enter the market, diversifying risk hedging tools, solidifying strategic reserves, and transitioning the market from "volatile speculation" to "long-term investment." On the other hand, deepening institutional supply-side reforms, supporting the strengthening of top institutions, and promoting the industry to return to its essence. Particularly critical is the implementation of differential rates and abnormal monitoring for high-frequency trading to curb the disruption caused by speed advantages; strictly prohibiting excessive nesting of derivatives from practical needs; adhering to the principle of "substance over form" for new forms of blockchain like RWA, and preventing the infiltration of virtual asset risks. This set of regulatory measures is expected to reshape the industry landscape, enhance market fairness and resilience, and lead the financial industry into a new cycle of standardized and high-quality development. Risk warning: Significant fluctuations in the equity market affect the trading activity of stocks, reduced investor risk appetite affects market sentiment, the macroeconomic downturn affects market fundamentals, and the implementation of policies may be less than expected.