China Securities Co., Ltd.: Policy and liquidity resonance, continue to be bullish on the upward elasticity of non-bank sectors.

China Securities Co., Ltd. released a research report stating that the prosperity and valuation matching of the securities sector have increased this week, highlighting the value of allocation. Currently, the insurance sector is in a mismatched state where the liabilities end is of high quality and the asset end has high profit recovery certainty, yet valuations remain low, indicating significant allocation value. In the Hong Kong non-banking sector, the long-term allocation value is highlighted under the resonance of low valuation characteristics and profit improvement expectations. In terms of diversified finance, with stable regulatory logic, clear consumer-driven orientation, and the efficiency improvement of AI technology, the consumer finance industry is in a period of dual driving force from policy dividends and technological dividends. The main points of China Securities Co., Ltd. are as follows: Securities The prosperity and valuation matching of the securities sector have increased this week, highlighting the value of allocation. The securities II index rose by 5.47%, outperforming the market, with a daily average trading volume of 3,545 billion yuan (up 12.7% month-on-month and 138.5% year-on-year), and margin trading balance exceeding 3.03 trillion yuan (up 15.4% since the beginning of the year), with active trading and incremental funds forming a positive feedback loop. IPO focuses on new quality productivity, with a total of 3 companies listed in June 2026 (as of the 26th) raising 9.965 billion yuan. The finalization of public offering fee reforms promotes the industry's transformation towards a "return-oriented" direction. Compared to the end of 2025, the percentage of net asset value of equity funds decreased from 14.80% to 11.13%, while bond funds increased from 30.21% to 30.50%, and hybrid funds increased from 9.95% to 10.55%. The current sector PB is about 1.34 times, ranking at the 47th percentile over the past five years, with sufficient safety margin. Insurance The current insurance sector presents a pattern of favorable fundamentals and low valuation mismatch, highlighting the value of allocation. The core investment logic can be divided into three main themes: firstly, the liabilities end achieves a rise in quantity and quality, and the advantages of leading insurance companies continue to strengthen. As the wealth effect of real estate weakens, the new regulations on asset management promote the transformation of wealth management into net asset value, and in the background of low interest rates, the reconstruction of household wealth drives the growth of savings insurance demand, with the new premium of 5 listed insurance companies in the first quarter of 2026 increasing by 15.0% year-on-year. At the same time, the optimization of product structure, downward trend of previous reserve interest rates, and the implementation of document 65 continue to improve the industry's liability costs and business quality. Secondly, there is a strong certainty in the profit recovery of the asset end, with the Shanghai and Shenzhen 300 Index showing a better increase since April compared to the same period last year. Combined with the previous increase in equity allocation by insurance companies, the performance recovery space opens up, and the mid-term report is expected to be an important catalyst for the valuation repricing of the sector. Thirdly, the sector's valuation is still low, with the PEV valuation of several listed insurance companies below the 20th percentile over the past three and five years, indicating that the market has overly discounted the pressure of a high base, yet has not fully reflected the positive expectations of improvement in liabilities and profit recovery, indicating sufficient potential for valuation recovery. Risk warning: Uncertainty in market price fluctuations, uncertainty in corporate profit forecasts, and technological updates and iterations.