China Securities Co., Ltd.: Opening up insurance capital investment in Stock Connect ETFs to help optimize cross-border asset allocation.

China Securities Co., Ltd. released a research report stating that the short-term performance of the securities sector is mainly affected by high-level market consolidation, but high trading volume, stabilized margin financing, optimized financing structure, and low valuation percentiles still support mid-term allocation value. In the insurance sector, allowing insurance capital to invest in Stock Connect ETFs further expands the toolbox for cross-border equity allocation by insurance funds, helps alleviate QDII quota constraints, improves allocation efficiency, and is expected to help insurance funds better consolidate long-term spreads through diversified asset allocation in a low-interest-rate environment. Hong Kong non-bank interim results are improving while valuations remain low. Under a tight-balance pattern in the second half of the year, the resonance of fundamental improvement and valuation repair may present structural opportunities. With policy dividends and technology dividends being realized in tandem, it is recommended to closely follow the main line of "low valuation + high dividend + high growth." The main views of China Securities Co., Ltd. are as follows: Securities Industry View From September 21 to September 24, the average daily turnover in the A-share market was RMB 1,913.507 billion, up 5.72% week-on-week and down 17.28% year-on-year. Market turnover gradually fell back from the previous range above RMB 2 trillion to around RMB 1.9 trillion, and trading activity cooled somewhat. In terms of the weekly rhythm, the market rebounded in choppy trading on Monday, with the three major indices all closing higher. Sectors that had previously corrected more, such as pharmaceuticals and real estate, strengthened in a concentrated manner, while technology stocks recovered somewhat. In the following trading days, the market rose then fell back, with more decliners than advancers, and turnover gradually contracted from above RMB 2 trillion. As the holiday approached, some funds chose to stay on the sidelines. In terms of sector rotation, the main line of industry rotation this week shifted from the previous "seesaw between heavyweight and technology" to "high-low switching and style rebalancing": low-position sectors such as pharmaceuticals and real estate were active in phases, themes such as humanoid Siasun Robot&Automation took turns performing, and the AI hardware chain, including communications and components, fluctuated at high levels with intensified internal divergence, while some funds continued to rotate toward dividend and cyclical sectors. Overall, the current market is in a stage of high-level consolidation, with both declining volume and accelerating sector rotation coexisting. Going forward, it is necessary to track changes in volume and the sustainability of liquidity conditions. Margin financing and securities lending balances have generally rebounded but remain at historical highs. As of September 23, 2026, the margin financing and securities lending balance across the Shanghai, Shenzhen, and Beijing markets reached RMB 2,655.008 billion, up about 4.50% from the beginning of the year and up slightly 0.64% week-on-week, accounting for 2.66% of A-share free-float market capitalization. Since the beginning of the year, margin balances have generally maintained positive growth, indicating that market risk appetite is still in a recovery channel and that leveraged funds have not fundamentally reversed their expectations for the market outlook. Currently, the ratio of margin balances to free-float market capitalization is stable at around 2.7%, and the leverage level is basically matched with market capitalization expansion, with systemic leverage risk generally controllable. If margin balances can stabilize at the current high platform or even resume an upward trend, it will further confirm the sustainability of incremental capital inflows and provide additional liquidity support for the market. IPO and refinancing pace is stable, focusing on new quality productive forces. In terms of IPO issuance, based on listing date statistics, as of September 24, 2026, a total of 18 companies listed, raising RMB 20.445 billion; in terms of refinancing, corporate equity refinancing totaled RMB 46.056 billion. From the issuance structure, the IPO market continues to be led by technology companies, with listed and filed targets concentrated in core tracks of new quality productive forces such as semiconductors, artificial intelligence, and new energy, and the industry distribution is highly consistent with the direction of industrial structure upgrading. The institutional inclusiveness of the STAR Market and ChiNext continues to strengthen, the listing channel for unprofitable hard-tech companies has been further broadened, and the review efficiency for high-quality technology companies has improved somewhat. In refinancing, private placements still occupy the dominant position in equity financing, and policy continues to optimize around three major directions: supporting high-quality companies, adapting to science and innovation enterprises, and facilitating mechanisms. As a stock-bond hybrid instrument, convertible bonds have expanded their function in the refinancing system. Overall, while the equity financing market maintains a steady pace, its resource allocation function is tilting toward technological innovation, and the institutional foundation for the capital market to serve the real economy and support the development of new quality productive forces continues to be consolidated. In terms of public funds, scale continued to grow, while the share of equity funds declined slightly. According to statistics from Hithink RoyalFlush Information Network, as of September 24, the net asset value of China's public funds reached RMB 38.98 trillion (excluding the market value of ETF feeder funds; ETFs use the latest on-exchange scale), up 6.06% from the end of 2025. Compared with the end of 2025, the net asset value share of equity funds decreased by 3.74 pct from 14.80% to 11.06%, bond funds increased by 1.75 pct from 30.21% to 31.96%, and mixed funds increased by 2.07 pct from 9.95% to 12.02%. Since 2026, with the official completion of the three-stage fee reform, the implementation of performance benchmark guidelines, new disclosure rules mandating disclosure of core indicators such as the proportion of profitable investors, and performance assessment management guidelines raising the weight of medium- and long-term assessments of more than three years to more than 80% and establishing a mechanism linking shareholder dividends with investor profit and loss, the public fund industry's transition from "scale-oriented" to "return-oriented" has gained institutional support. The coordinated efforts of the above policies mark that China's public fund industry has fully entered a new stage centered on investor interests and aimed at high-quality development. In terms of individual stocks, we continue to favor three main lines: 1) securities firms with abundant technology project reserves and differentiated competitiveness in large investment banking business; 2) securities firms and fintech targets leading in market share and revenue elasticity in large wealth management business; 3) from a medium- to long-term perspective, top-tier securities firms whose accelerating internationalization drives a rise in ROE center. External environment: In the short term, the possibility of the Federal Reserve turning to rate cuts is relatively low, and the policy focus remains on suppressing inflation. The September 16 FOMC meeting voted 12-0 to raise rates by 25 basis points, lifting the federal funds rate target range to 3.75%-4.00%, the first tightening since July 2023. The median dot plot released the same day showed the end-2026 rate expectation at 4.1%, corresponding to possibly one more hike within the year, unchanged in 2027, and possible rate cuts only in 2028. The background supporting this path is that August CPI rose 3.4% year-on-year, and the Federal Reserve raised its 2026 core PCE inflation forecast to 3.4%, indicating inflation stickiness remains; meanwhile, the labor market remains solid, with August nonfarm payrolls adding 162,000 and the unemployment rate holding at 4.1%, and economic resilience provides room for policy to maintain a restrictive stance. U.S. economic data this week were relatively light, with the main focus on marginal changes in the September PMI, initial jobless claims, and durable goods orders. The opening of the subsequent rate-cut window depends on confirmation of a downward inflation trend and clearer signs of weakening in the labor market. Before that, the high-interest-rate environment may persist. Insurance Industry View On September 24, 2026, according to China Securities Journal, the General Office of the National Financial Regulatory Administration recently issued a letter to local financial regulatory bureaus, insurance group (holding) companies, insurance companies, and insurance asset management companies clarifying the regulatory caliber for insurance funds investing in Stock Connect ETFs. The document clarified the relevant regulatory caliber: insurance institutions that may invest in Stock Connect stocks under regulatory rules may invest in Stock Connect ETFs, executed in accordance with the relevant regulatory provisions on insurance funds investing in Stock Connect stocks. This regulatory caliber took effect on September 20. We believe the main impacts of allowing insurance funds to invest in Stock Connect ETFs include: First, it helps expand the toolbox for cross-border equity allocation by insurance capital, alleviates QDII quota constraints, and improves the availability and execution efficiency of overseas allocation. In the past, insurance funds increasing overseas asset allocation generally faced the constraint of scarce QDII quotas. Allowing insurance capital to invest in Stock Connect ETFs adds a regular overseas equity allocation channel for insurance capital that does not need to occupy QDII quotas. The market is currently in a sustained low-interest-rate environment, yields on fixed-income assets for insurance funds are thinning, and pressure from the industry's asset shortage is prominent. Stock Connect ETFs are standardized overseas equity investment tools with high deployment efficiency. On the one hand, they can enrich equity investment categories and help increase overall investment returns; on the other hand, they can further optimize asset portfolio structure, improve asset diversification, and effectively improve the overall risk-return profile of the portfolio. It should be specially noted that the investment targets of Stock Connect ETFs are not limited to the Hong Kong stock market. Southbound Stock Connect ETFs require that the tracked underlying index have both a weight of Hong Kong Stock Exchange-listed stocks and a weight of Stock Connect stocks of no less than 60%, and may allocate a certain proportion to stocks in other markets. At present, some southbound Stock Connect ETF products invest not only in Hong Kong stocks but also in stocks listed in other overseas markets such as the United States, South Korea, and Japan. Second, it helps optimize the portfolio construction model for insurance capital and improve asset allocation and rebalancing efficiency. Compared with directly investing in overseas individual stocks, ETFs have the natural advantages of basket asset holdings, transparent investment rules, convenient trading mechanisms, and low position concentration. By allocating to Stock Connect ETFs, insurance capital can quickly build cross-border equity strategy exposure, flexibly adjust portfolio industry weights, and reduce market impact costs caused by large-scale rebalancing. In periods when market styles rotate rapidly, industry rotation accelerates, or insurance capital internally needs to rebalance asset portfolios, the advantages of ETFs' efficient allocation and convenient rebalancing will become more prominent. At the same time, relying on the diversified basket holdings of ETFs, insurance capital can effectively reduce risk exposure to a single target, lower the portfolio's non-systematic risk, and improve overall portfolio stability. Third, leading insurers with strong capital strength are expected to benefit more significantly. Stock Connect ETFs are classified as overseas equity assets and carry relatively high capital occupation attributes, placing higher requirements on insurers' capital strength and solvency levels. Leading insurers have abundant capital reserves, higher comprehensive solvency adequacy ratios, and stronger risk resistance, and generally have more ample capital space to carry out Stock Connect ETF allocation, fully leveraging this tool to achieve cross-market diversified asset allocation and optimize long-term investment returns. On September 24, 2026, the National Financial Regulatory Administration released the monthly operating situation of the insurance industry for August 2026. In life insurance, from January to August, cumulative original insurance premium income was -0.2% year-on-year, of which life insurance, accident insurance, and health insurance were +0.04%/-10.0%/-1.08% year-on-year, respectively; in August alone, original insurance premium income for life insurance was -13.6% year-on-year, of which life insurance, accident insurance, and health insurance were -15.1%/-6.9%/-4.6% year-on-year, respectively. In property insurance, from January to August, cumulative original insurance premium income was +2.2% year-on-year, of which auto insurance and non-auto insurance were flat/+4.4% year-on-year, respectively; in August alone, original insurance premium income for property insurance was +1.8% year-on-year, of which auto insurance and non-auto insurance were -0.02%/+4.5% year-on-year, respectively. From January to August, the cumulative loss ratio rose 0.28 pct year-on-year to 58.6%; in August alone, the loss ratio rose 0.1 pct year-on-year to 75.3%. On September 24, 2026, the National Financial Regulatory Administration issued the announcement on the 2025 motor vehicle traffic accident liability compulsory insurance business situation. It noted that in 2025, compulsory traffic accident insurance coverage continued to expand, with the number of insured motor vehicles reaching 386 million, up 3.8% year-on-year. Among them, the number of insured automobiles totaled 347 million, up 3.9% year-on-year. Risk protection capacity was effectively strengthened, with compulsory traffic accident insurance coverage amounting to RMB 76.8 trillion that year, up 3.4% year-on-year. Compensation expenses that year were RMB 252.4 billion, up 11.6% year-on-year, and the role in protecting people's livelihoods improved significantly. Premium income grew steadily, with compulsory traffic accident insurance premium income of RMB 285.2 billion that year, up 5.2% year-on-year. Average premium per vehicle was basically stable, with average compulsory traffic accident insurance premium per vehicle of RMB 762.1 that year, down 0.1% year-on-year. Affected by factors such as higher compensation standards for personal injury protection and a higher share of new energy vehicles, the compulsory traffic accident insurance business posted an operating loss of RMB 23 billion that year. At the same time, the insurance industry continued to strengthen regulation, standardize disorderly competition, and promote cost reduction and quality improvement. From January to August 2026, the industry's auto insurance combined ratio fell to 95.8%, and operations and management continued to optimize. We believe that the main investment line for the insurance sector is expected to gradually shift to valuation repair based on medium- and long-term value and high-dividend allocation investment opportunities. Looking ahead to the third quarter, both the asset and liability sides face some pressure of sequential weakening under the high base of the same period last year, and the main upside driver for share prices is expected to shift from interim report earnings growth to valuation repair based on medium- and long-term value and high-dividend allocation demand. The fourfold positive resonance of strong demand for residents' savings-type insurance + favorable industry "anti-involution" policies + channel-side efforts to expand incremental business + high-quality transformation of participating insurance clearly points to a improving long-term fundamental trend for listed insurers. If subsequent macroeconomic policy support exceeds expectations, it may become a catalyst for sector valuation repair. Overall, at the current position, the medium- and long-term allocation value of the insurance sector is prominent. If potential pressure on third-quarter performance growth under a high base causes short-term disturbances to share prices, it is recommended to seize the opportunity to position on dips and favor valuation repair based on medium- and long-term value and high-dividend allocation investment opportunities. Hong Kong Market and HKEX View Hong Kong non-bank interim results are improving while valuations remain low. Under a tight-balance pattern in the second half of the year, the resonance of fundamental improvement and valuation repair may present structural opportunities. Since September, the Hong Kong stock market has corrected, with the Hang Seng Index down 4.13% and the Hang Seng Tech Index down 6.67%, and the Hong Kong market overall underperformed the MSCI World Index by 3.93%. On the asset side, as of September 25, the total market capitalization of Hong Kong stocks was HKD 45.27 trillion, down 3.99% from the end of August; on the funding side, Hong Kong stock trading activity has declined somewhat since September; ADT was HKD 204.878 billion, down 11.05% month-on-month; among this, southbound capital ADT fell 18.99% month-on-month, accounting for 21.21%. Derivatives trading volume also declined, with futures ADV at 530,000 contracts, down 0.70% month-on-month and down 20.44% year-on-year; options ADV at 920,000 contracts, up 11.54% month-on-month and down 21.20% year-on-year. In terms of interest rates, HIBOR rates have risen again since September; as of September 25, 6M HIBOR reached 3.51%, up 0.29 pct month-on-month and up 0.63 pct year-to-date; and as HIBOR remains high, HKEX investment income is expected to remain elevated, and the "hedging" effect is expected to become more prominent. From the perspective of the share of short-selling turnover, short-selling activity in Hong Kong stocks has increased; in September, the share of short-selling turnover in Hong Kong stocks rose 3.94 pct month-on-month to 20.85%; and from the latest updated short position ratio in Hong Kong stocks, as of September 25, the ratio of short position amount to total market capitalization rose 0.02% from the end of August to 2.39%. How should Hong Kong stock trading activity be viewed in the fourth quarter? In the fourth quarter, Hong Kong stock trading activity is likely to continue a "tight balance" pattern, conditions for a full-scale volume-driven upward move are not yet sufficient, and structural rotation remains the main theme. In the first half of 2026, the Hong Kong stock market experienced a round of correction, with the Hang Seng Index cumulatively falling 10.73% and the Hang Seng Tech Index falling 18.92%. At dawn Beijing time on September 17, the Federal Reserve announced a 25 basis point increase in the federal funds rate target range to 3.75%-4.00%, the first tightening since July 2023, with the decision passed by a unanimous 12-0 vote. The median dot plot showed possibly one more hike before the end of 2026, with rates unchanged in 2027. After the decision, the 10-year U.S. Treasury yield rebounded above 5%, the dollar index broke above 100, and global risk assets came under broad pressure. External liquidity constraints have shifted from expectation to reality, and high rates may persist longer than previously judged, leaving investor sentiment cautious. Based on the current dynamic assessment, Hong Kong stock trading activity in the second half of the year is more likely to show structural differentiation rather than an overall leap. From the perspective of external liquidity and funding structure, valuation suppression under the Hong Kong dollar's linkage to the U.S. dollar and the divergence in behavior between domestic and foreign capital are the two main lines in funding conditions. Under the linked exchange rate system, Hong Kong interbank rates generally approach U.S. dollar rates. After the Fed's September hike, the Hong Kong Monetary Authority immediately followed by raising the base rate by 25 basis points to 4.25%. Hong Kong dollar rates will remain high along with the U.S. dollar, posing pressure on Hong Kong stock valuation repair. On the domestic capital side, the previously record southbound inflows slowed somewhat in 2026, with the pace of inflows fluctuating. In terms of allocation structure, funds show a "barbell" rebalancing characteristic, shifting from high-valuation internet sectors to high-dividend dividend plays and directions such as innovative drugs and new consumption. On the foreign capital side, amid continued uncertainty over the Fed's policy path, institutions differ on the expected timing of rate cuts, and the strength of systematic foreign replenishment in the fourth quarter is questionable. Overall, southbound inflows in the second half of the year may be higher than in the first half and are still expected to constitute the main source of incremental funds, but full-year funding conditions are likely to remain in a tight balance. From the perspective of asset supply and earnings repair, asset structure optimization coexists with supply-side pressure, and earnings verification remains the core variable. On the one hand, hard-tech companies continue to actively list in Hong Kong, and the listing pipeline provides underlying support for medium- and long-term liquidity; on the other hand, in the second half of the year, the lifting of lock-up shares combined with concentrated IPO and refinancing releases means supply-side expansion will test the market's capacity to absorb funds, and existing funds face diversion pressure. At the earnings level, profit repair in Hong Kong's non-financial sectors is expected to continue in the second half of the year, but overall corporate earnings growth remains weaker than previously expected, and the market is shifting from "valuation-driven" to "earnings verification," requiring a resonance signal of upward earnings expectation revisions. Taken together, whether Hong Kong stock trading activity can continue in the second half of the year depends on a threefold game: first, the pace of Fed policy evolution under Warsh's leadership. The September hike has landed, but the dot plot shows one more hike may still be possible within the year, and guidance that rates remain unchanged in 2027 means the timing of external liquidity easing may be delayed. Subsequent FOMC meetings and inflation data remain important observation points; second, whether the pace of southbound capital inflows can remain stable; third, the dynamic balance between new share supply expansion and the market's capacity to absorb funds. Under the dual constraints of tightening external liquidity expectations and slow internal earnings repair, Hong Kong stocks in the second half of the year are more likely to show structural activity under a "tight balance" rather than a full-scale volume-driven upward move. High-dividend defensive sectors and booming tracks such as AI applications, innovative drugs, and new consumption may continue to show rotation characteristics, while traditional internet and financial sectors may come under relative pressure. A substantive reversal in market trends still requires waiting for the resonance signal of upward earnings expectation revisions and improvement in the external liquidity environment. Consumer Finance Industry View Driven by the implementation of the Regulations on Explicit Disclosure of Comprehensive Financing Costs for Personal Loan Business (hereinafter referred to as the "New Comprehensive Financing Cost Rules"), increased consumption-promotion policies, and AI technology efficiency gains, the consumer finance industry is shifting from "implicit pricing gaming" to "explicit cost competition." The industry is in a period of resonance between the release of policy dividends and the realization of technology dividends. Such institutions, relying on compliance first-mover advantages and refined operational capabilities, can both capture the beta of industry volume-price-quality repair and build excess return alpha through technological barriers. They are currently in a double-hit window of earnings realization and valuation repair. (1) Industry fundamentals: triple resonance of "stable volume, rising price, superior quality," and the 2026 valuation repair cycle is established Volume: penetration rate improvement offsets stock competition. In 2026, macro stimulus combined with economic recovery will continue to raise the penetration rate of online credit services. Despite stricter regulation, leading consumer finance and loan facilitation institutions, relying on compliant traffic and scenario advantages, are expected to maintain steady loan volume growth of +5%-10% year-on-year. Price: transparency of comprehensive financing costs forces interest spreads to stabilize. The "New Comprehensive Financing Cost Rules" mandate disclosure of all fees, eliminating gray fee-charging space. Although this suppresses nominal interest rate ceilings in the short term, in the long term, with normalized ABS issuance, AI technology reducing per-customer operating costs, and improved risk costs, industry revenue growth is expected to return to double digits. Pricing transparency is instead conducive to leading institutions diluting costs through scale effects and alleviating pressure from narrowing interest spreads. Quality: forward-looking indicators improved month-on-month, and asset quality divergence intensified. Forward-looking indicators such as D1 first payment default rate, D30 recovery rate, and D90 delinquency rate have shown inflection points. Under unified regulatory standards, companies whose asset quality recovers first will gain higher earnings elasticity. (2) In-depth interpretation of the new regulatory rules: from "formal compliance" to "substantive pricing anchoring" Regulatory scope seamlessly connects, closing arbitrage space. The "New Comprehensive Financing Cost Rules" not only cover small loan companies but also bring banks, consumer finance companies, loan facilitators, and other full-business formats into a unified disclosure framework. Its core lies in unifying the calculation caliber of "comprehensive financing costs" across various lending entities, preventing institutions from conducting regulatory arbitrage by changing license types or splitting fee structures. This means that regardless of the licensed entity, as long as it lends to end customers, it must follow the same set of cost display and pricing constraint standards. Forming a "combination punch" with the new loan facilitation rules, anchoring the long-term goal of declining interest rates. The "New Loan Facilitation Rules" focus on "cleaning up gray models," eliminating hidden fees such as dual guarantee fees and membership fees, and achieving pricing transparency; while the "Small Loan Guidelines" and the "New Comprehensive Financing Cost Rules" further propose a long-term hard requirement of "reducing to 4 times LPR" on the basis of transparency. Together, they mark that the consumer credit industry has moved from "cracking down on violations" to "guiding reasonable pricing," setting a clear long-term interest rate ceiling for the industry. Compliance becomes a core competitiveness, not merely a cost. Under the new rules, six consecutive months of compliance can lead to a regulatory rating upgrade, with priority access to tax reductions, inclusive finance relending support, and stable credit reporting permissions. Compliance capability directly translates into financing cost advantages and customer acquisition efficiency, and the Matthew effect among leading institutions will further strengthen. (3) Industry landscape evolution: customer group re-stratification and accelerated market-based clearing Competition for customer groups is intensifying, and the lower-tier market faces a major test of commercial sustainability. High-quality customer groups (interest rate range 12%-18%) will become the focus of competition across the industry, and profit space may be further compressed. Under the hard constraint of "comprehensive financing costs," long-tail customer groups with high risk and high service costs, if unable to break even within 4 times LPR, will be forced to exit. This compels institutions to rely on AI risk control and refined operations to expand the "profitable lower-tier boundary." Regulatory arbitrage disappears, and industry consolidation accelerates. Mid- and tail-tier small loan companies lacking technological capability and relying on high interest spreads will accelerate clearing (the number has already fallen from nearly 9,000 to 5,385). Leading institutions with abundant capital and leading technology will expand share through M&A, entrusted management, and other means, and industry concentration will rise significantly. Commercial banks: subject to dual regulation, with a judicial protection ceiling of 24%, but actual pricing is mostly 3%-8%. Regulators have halted price wars, and future focus will be on low-risk high-quality customer groups such as civil servants and central/state-owned enterprise employees, with basically no hidden fees or violent collection issues. Consumer finance companies: window guidance requires average pricing below 20%, with product ranges of 12%-24%. As a supplement to bank customer groups, they cover suboptimal to long-tail customers, with diversified risk pricing strategies, and are a key tier connecting the upper and lower levels. Small loans/internet small loans: subject to a 24% constraint in the short term, and long term (before the end of 2027) proprietary business needs to be reduced to 4 times LPR. Key cognitive correction: loan facilitation business is essentially technology services, with revenue derived from traffic and service fees, decoupled from loan interest rates, and not subject to the 4 times LPR limit. Its inclusive finance positioning remains unchanged, and it remains an important supplement to banks and consumer finance companies. Leading institutions may experience "volume reduction" in the short term due to compliance adjustments, but in the long term will benefit from market share concentration and improved earnings quality after industry clearing. (4) Investment strategy: avoid fragile entities and focus on two types of "compliance winners" Focus on two types of targets: first, state-owned/industrial-system consumer finance companies with strong shareholder backgrounds and low financing costs: naturally adapted to a low-interest-rate environment and possessing funding advantages that can traverse cycles. Second, leading credit technology platforms with outstanding fintech strength and successful transition to proprietary operations, whose compliance safety cushion is thick, and the impact of the "New Comprehensive Financing Cost Rules" on their on-balance-sheet business is controllable. A positive cycle has already formed: good compliance record -> regulatory rating upgrade -> access to low-cost funds and credit reporting support -> expand high-quality customer groups -> further consolidate compliance advantages. Leasing Industry View Core view: possessing the three excellence characteristics of "high interest spread, low non-performing ratio, high dividend." At present, the investment value of the leasing industry (including financial leasing and financial leasing) is reflected in three core dimensions: high net interest margin (leading companies' net interest margin reaches about 4%), low non-performing ratio (the industry's overall non-performing ratio is stable at about 1%), and high dividend return (the industry's average dividend yield exceeds 6%). These three advantages, combined with the industry's overall valuation at historically extremely low percentiles, make it a high-quality allocation direction with both defensive attributes and certain returns against the backdrop of intensifying financial market volatility and continued asset shortage. Fundamentals: interest spreads remain high, and asset quality continues to improve. Specifically: (1) Net interest margin remains at a relatively high level. Although net interest margins in the financial industry are generally under pressure, leasing companies still have buffer space in net interest margin due to pricing resilience on the asset side and high rental yields brought by credit sinking. According to sample statistics from the China Financial Leasing Industry Development Report 2026, in the first three quarters of 2025, the average net interest margin of financial leasing enterprises was 3.43%, significantly better than the overall level of commercial banks; leading listed institutions have stronger earnings resilience. (2) Asset quality improved steadily, and the non-performing ratio continued to decline. Asset quality indicators of financial leasing companies have recently shown marked improvement, with the proportion of non-performing financial leasing assets declining. According to the industry development report released by the Banking Association of China, as of the end of 2025, the industry-wide non-performing financial leasing asset ratio was 0.91%, steadily declining year-on-year; leading institutions performed better in asset quality. As of the end of June 2026, Jiangsu Financial Leasing's non-performing financial leasing asset ratio was 0.89%, maintaining a nearly five-year low, with a provision coverage ratio of 397.6%, and risk compensation capacity remained ample. (3) High-dividend attributes are prominent, constituting an important margin of safety, and listed leasing companies still show characteristics of high dividends and low valuation. In 2025, the dividend payout ratio of listed financial leasing companies remained at a relatively high level. In terms of policy and regulation, root causes are being addressed, accelerating industry differentiation and concentration among leading players (1) Systematic reshaping of the regulatory framework: since 2025, regulatory policies have been introduced intensively, building a dynamic regulatory mechanism covering the full life cycle: the Measures for Regulatory Rating of Financial Leasing Companies (January 2025): reasonably adjusting rating elements, optimizing regulatory rating levels, improving rating procedures, and strengthening the direct linkage between rating results and capital replenishment and business access. The Administrative Measures for Financial Leasing Companies' Financial Leasing Business (issued on December 5, 2025, effective January 1, 2026): with 8 chapters and 68 articles, centered on the "full business process," covering due diligence, risk evaluation and approval, contract conclusion and execution, post-lease management, risk management and internal control, and other links, filling some institutional gaps at the micro-operational level of the financial leasing industry and marking a shift in regulatory logic toward penetrating management of micro-business operations. (2) Returning to the origin of "financing objects" and curbing "quasi-credit" business: the new rules emphasize that the primary prerequisite for compliance in financial leasing business is compliance in the type of leased asset, strictly prohibiting non-equipment sale-leaseback and "low-value high-purchase," strengthening the suitability review of leased assets, and fundamentally closing the arbitrage space of "high appraisal and high loan." The core policy goal is to push the industry to return from the "quasi-credit" model to the origin of "financing + financing objects," better serving the real economy's equipment renewal and industrial upgrading needs. (3) Industry differentiation intensifies, and resources concentrate toward leading players: in the short term, higher compliance costs and stock cleanup will bring industry pain, but in the long term will push the industry from "scale expansion" to "quality improvement." Leading companies will further concentrate market share through professional capabilities and compliance advantages, while small and medium-sized companies need to seek survival space through deep cultivation in segmented fields.