HK Stock Market Move | Chinese brokerage stocks rise collectively; three government departments reportedly meet with financial institutions today; institutions say brokerage valuations are severely mismatched with profitability.

Chinese brokerage stocks rose collectively. As of press time, CICC (03908) gained 5.01% to HK$17.82; CMSC (06099) gained 4.23% to HK$12.82; GF SEC (01776) gained 4.16% to HK$16.29; CITIC SEC (06030) gained 4.02% to HK$20.68. On the news front, on Monday the PBOC will convene a meeting with major banks together with the National Financial Regulatory Administration and the CSRC to study optimizing the policy on relending for share buybacks and increased holdings. Industry participants speculate that the meeting is most likely preparation by financial regulators to further stabilize the market. In addition, securities firms and fund companies have received notices that on November 2, the People's Bank of China and the China Securities Regulatory Commission will hold a meeting to study promoting the use of capital market tools. Separately, according to Cailianshe, a super-large state-owned bank recently plans to add new share buyback and increased-holding loan quotas for the two central SOEs China Reform Holdings and China Chengtong, with the new quota for each potentially reaching RMB100 billion. Sinolink noted that brokerages' 26Q3 results came under pressure mainly due to proprietary trading, while other business lines performed steadily, in line with expectations. On a cumulative basis, annualized ROE reached 8.3%, still the highest since 2022, with profitability continuing to improve. In 26Q3, the scale of active equity fund allocations to brokerages fell 47% quarter-on-quarter, and the sector allocation ratio fell 0.14pct quarter-on-quarter to 0.33%, deepening the underweight position. The sector's PB (LF) has pulled back to 1.02x, and the dynamic PB should already be below book value, with valuation and profitability severely mismatched. The current valuation and positioning structure provide a safety cushion for the sector, and we suggest watching for relative-return opportunities.