Market Insight | Chinese brokerage stocks continue to decline, with CMSC plummeting by 11% and CITIC SEC dropping nearly 8%
Chinese brokerage stocks continue to decline, with CMSC plummeting by 11% to HKD 11.88, and CITIC SEC dropping nearly 8% to HKD 19.4. Analysis indicates that the overall valuation of brokerage firms is affected by financial regulations and a sluggish market, leading to weakened profitability. Despite short-term adjustments, loose monetary and countercyclical fiscal policies are expected to support the long-term strength of brokerage firms, with improved performance in the third quarter also bringing optimistic expectations
According to the information from Zhitong Finance and Economics APP, Chinese brokerage stocks continue to decline. As of the time of publication, China Merchants Securities (06099) fell by 10% to HKD 11.88; Shenwan Hongyuan (06806) fell by 9.5% to HKD 2.19; CITIC Securities (06030) fell by 7.62% to HKD 19.4; CITIC Securities (06066) fell by 6.97% to HKD 9.07.
Guotou Securities pointed out that before this round of rise, the overall valuation level of brokerage firms was only at the 0.5th percentile of the past 5 years, mainly constrained by stricter financial regulations and the overall poor market performance, leading to weakened profitability of brokerage firms. Both of these factors have changed significantly by the end of September. Currently, the valuation of brokerage firms is around 1.5 times PB, close to the high valuation points of previous rounds of market trends. However, we believe that the broad monetary and countercyclical fiscal efforts this time are expected to sustain the market trend, and the previously low valuation level of brokerage firms is expected to be restored. Short-term market adjustments will not affect the long-term strength trend of the brokerage sector.
Huaxi Securities, on the other hand, stated that since September 24, the brokerage sector has risen rapidly and then experienced some pullback. We believe that a moderate pullback is benign and a necessary condition for the market to move higher and longer. Currently, the sector's PB ratio has retraced from around 1.8X at the short-term peak to 1.5X, indicating that the pullback may be nearing its end. Combined with the significant improvement in third-quarter performance, we are optimistic about the third-quarter earnings season