Founder: International business contributions are expected to increase. Focus on top securities firms with high ROE and low PB ratios.

Founder releases research report stating that top securities firms are widening the gap in ROE with middle and small securities firms, focusing on investment opportunities with continuous improvement in fundamentals and deviation in returns. Key focuses include: 1) top securities firms with high ROE and low PB ratios; 2) local state-owned securities firms with low PB ratios and strong development goals; 3) high trading performance elasticity. Founder's main points are as follows: 1. Review: High growth in sector performance in the first quarter, weak stock price performance The capital market remains active, with the securities sector seeing high growth in 1Q26, and significantly better ROE for top securities firms. The net profit of the securities sector increased by 17% year-on-year in 1Q26, and non-GAAP net profit increased by 39% year-on-year. The combined net profit of the sector in 1Q26 reached 60.9 billion yuan, up 17% year-on-year and 40% quarter-on-quarter, reaching a high level for the quarter; non-GAAP net profit was 59.5 billion yuan, up 39% year-on-year and 37% quarter-on-quarter. Haitong Securities (16.1%), Changjiang Securities (15.8%), Citic Securities (13.8%), CICC (13.4%), and GF Securities (13.3%) ranked in the top 5 in annualized ROE for 1Q26. The securities index has been under pressure since the beginning of the year. As of May 28, 2026, the Securities II Index (SW) has fallen by 15.8% year-to-date, underperforming major stock indexes. 2. Market: Adequate room for household deposits to enter the market, policies continue to support stable capital market There is still room for household deposits relative to the total market value of A-shares. In terms of the stock market, with the expansion of A-shares, the trading volume of the market is increasing. In April 2026, the "residential deposits/A-shares total market value" indicator had dropped to 1.48, historically, this indicator has been below 1 at the peak of a bull market, indicating that there is still ample room for further market participation, and the phenomenon of "deposit relocation" is expected to continue. Policies have repeatedly emphasized the stability of the capital market. Looking ahead to the 14th Five-Year Plan, "accelerating the construction of a financially strong country" was written into the five-year plan for the first time, highlighting the increasing importance of building a strong capital market. The recent Politburo meeting also reiterated the need to "stabilize and enhance confidence in the capital market," signaling an evident increase in attention and support for the capital market at the national level. 3. Fundamentals: The rise in trading volume supports fundamental improvements, international business contributions expected to increase The rise in trading volume is expected to continue to support high profit growth in the securities sector. Looking at the main indicators, the average daily turnover of stock-based transactions in 1Q26 was 3.15 trillion yuan, up 77.3% year-on-year, with the average daily margin balance at 2.66 trillion yuan, up 42.0% year-on-year, both increasing further from 2025. The profitability of international business is strong, and profit contributions are expected to increase. The ROE performance of securities international subsidiaries is impressive, significantly higher than the overall company. In terms of profit scale, the net profit of international subsidiaries has generally seen high year-on-year growth, as securities international subsidiaries continue to increase capital to solidify their capital strength, promising further contributions from securities international business. Risk Warning: Stock and bond market adjustments; decreasing trading activity; slowdown in the entry of incremental funds into the market.