Guosheng: Cross-border securities business regulation tightens again, positive about the value of insurance sector allocation.

Guosheng released a research report stating that overall performance of brokerage firms in the first quarter was impressive, with the market remaining active, providing solid support for the improving industry fundamentals. Since May, securities ETFs have seen a net inflow of 5.5 billion yuan, with signs of sector rotation emerging. Currently, the sector's valuation is at historically low levels, highlighting the cost-effectiveness of sector allocation. Since 2026, the liability side of the insurance industry has continued to benefit from the trend of bank deposit migration, with a positive trend expected to continue; since April, the A-share market has significantly rebounded, enhancing the certainty of subsequent investment returns. The valuation of the insurance sector is still at historical lows, with ample room for recovery, and a positive outlook is held for the sector's value in left-side configuration. Guosheng's main points are as follows: Tightening regulations on cross-border securities business 1) In November 2021, the China Securities Regulatory Commission (CSRC) held talks with the core executives of Futu Holdings and Tiger Brokers, clarifying that their cross-border securities business did not comply with the Securities Law. 2) By the end of December 2022, the CSRC formally stated that the activities of Futu Holdings, Tiger Brokers, and others constituted illegal operation of securities business, and initiated rectification work in accordance with the law. 3) In January 2023, the "Regulations on the Management of Securities Brokerage Business" was officially implemented, strengthening the daily supervision of illegal cross-border brokerage business, and providing legal basis for subsequent supervision. 4) On May 22, 2026, the CSRC and eight other departments issued the "Implementation Plan for Comprehensive Rectification of Illegal Cross-border Securities, Futures and Fund Management Activities" (hereinafter referred to as the "Plan"), focusing on a 2-year crackdown on overseas institutions engaged in illegal cross-border operations, domestic affiliates assisting them, illegal intermediaries soliciting investors, and internet platforms and self-media outlets that release information in violation of the rules. The goal of the Plan is to "resolutely ban illegal activities and prudently clear outstanding issues" 1) Completely ban overseas institutions engaging in illegal cross-border operations, while also including any violations related to foreign exchange management, anti-money laundering, and other regulations in the rectification process. 2) Prohibit overseas institutions from providing services such as marketing, account opening, order processing, and fund transfers in China; prohibit domestic entities from assisting in providing such services and related technical support. 3) During the rectification period, prohibit the provision of buy and fund transfer services to existing investors, allowing only one-way sell and fund withdrawals. 4) After the rectification period, completely close down relevant domestic websites and apps, and prohibit the provision of any domestic trading services to existing investors. The Plan will benefit compliant cross-border securities business channels in the long term After the implementation of the plan, due to the closure of illegal overseas securities trading channels, the inflow of funds into legal overseas investment channels such as QDII funds and cross-border wealth management platforms is expected to increase, providing long-term benefits for compliant cross-border securities business. Risk warning: 1) Significant fluctuations in the equity market affecting net profits; 2) Policy implementation falling short of expectations; 3) Weak demand for life insurance leading to lower than expected growth in new policies and NBV; 4) Risks of interest rate decline causing spread losses.