Huachuang Securities has released a research report indicating that the brokerage sector's current core drivers lie in the resonant recovery of "historically low valuations, a high trading volume foundation, and the convergence of negative excess returns." The sector's valuation has long been positioned at an absolute historical low percentile, providing a solid safety margin and prominent defensive characteristics. Previously, the sector underperformed the broader market by a historically rare margin, yet the right-side inflection point for negative excess return convergence has now been established, leaving ample room for catch-up gains. Market activity remains elevated, driving sustained growth in brokerage and credit businesses while enhancing proprietary trading liquidity reserves. With a clear high-prosperity backdrop for cumulative performance in the first three quarters, coupled with the realization of gains from STAR Market hard-tech project investments and the high-growth expansion of offshore capital-heavy platforms as new growth pillars, the industry's long-term earnings center is expected to shift upward, potentially leading to a substantive valuation uplift for the sector.
Key viewpoints from Huachuang Securities are as follows:
Comprehensive growth across core businesses with record quarterly profitability
The 42 listed brokerages achieved combined total operating revenue of RMB 363.78 billion in H1 2026 (up 44.4% year-on-year) and net profit attributable to shareholders of RMB 155.15 billion (up 49.2% year-on-year), with over half of the brokerages reporting net profit growth exceeding 30%. Firms such as China Merchants Securities, Huaan Securities, and Zhongtai Securities saw growth rates more than doubling. In Q2 2026 alone, single-quarter net profit attributable to shareholders reached RMB 94.3 billion (up 81.9% year-on-year and 55.0% quarter-on-quarter), marking the highest single-quarter profitability level in nearly three years. By business segment, proprietary trading—serving as the largest profit determinant—generated RMB 168.75 billion in total revenue (up 50.2% year-on-year). The normalization of two-trillion-yuan daily trading volumes drove synchronized high growth in brokerage net income (RMB 90.73 billion, up 55.4% year-on-year) and credit business revenue (RMB 30.06 billion, up 52.9% year-on-year). Investment banking and asset management also achieved steady recovery, with the Matthew effect among leading firms continuing to solidify.
Systematic leverage cycle initiation with ROE returning to double-digit territory
In H1 2026, listed brokerages demonstrated a strong willingness to actively expand their balance sheets, with the industry's average leverage ratio rising to 4.9x, surpassing the previous historical highs of 3.8x in 2015 and 4.2x in 2021. Leading brokerages saw their leverage ratios climb steeply to 5.4x (with CICC at 6.4x and Shenwan Hongyuan at 6.1x), while mid-to-small cap brokerages also broke out of their near-decade-long sideways range to reach 4.0x. In the low-interest-rate environment, brokerages seized the window to issue RMB 813 billion in corporate bonds (up 150.3% year-on-year with a 16bp cost reduction) and RMB 263.1 billion in short-term financing bonds (up 49.9% year-on-year with a 27bp cost reduction), leveraging low-cost active liabilities to significantly expand their capital intermediary base. On the asset side, ROA recovered to 2.1%, driving the industry's annualized ROE to 10.4%, a decade-high.
Dual-engine advancement of "STAR Market follow-on investments and offshore platforms" building a robust profit reservoir
Previously regarded as marginal supplements, investment-related and overseas expansion businesses have now been fully validated by interim reports as transforming into core profit pillars. Alternative investment and private equity subsidiaries have erupted across the board. Guotai Haitong's Zhengyu (net profit of RMB 6.51 billion) and China Merchants Securities Investment (net profit of RMB 5.22 billion) contributed 32.1% and 49.1% of their respective group profits, while specialized mid-sized brokerages such as Changjiang Securities, Orient Securities, and Huafu Securities also broke through with their alternative investment subsidiaries. Unvested STAR Market follow-on investments are highly concentrated in three hard-tech sectors: electronics (18 companies), pharmaceuticals (9 companies), and machinery (8 companies). Leading firms including CSC Financial (RMB 6.47 billion), CICC (RMB 6.21 billion), and CITIC Securities (RMB 3.93 billion) hold substantial unrealized gains, with targets such as CXMT validating the flywheel value of the "investment banking plus investment" model. Meanwhile, offshore platforms have accelerated comprehensively on the back of the recovery in Hong Kong's primary equity market and client-driven demand for cross-border derivatives and FICC products. CITIC Securities International saw revenue surpass RMB 10 billion (contributing 24.2% of group profits), while CICC International reached a 46.1% profit contribution ratio, marking the overseas business's entry into a scaling-up phase.
High-prosperity trading underpins earnings foundation, forming a significant divergence with ultra-low valuations and high negative excess returns
The average daily market turnover in July and August of this year reached RMB 2.7 trillion and RMB 2.3 trillion respectively, consistently ranking among historical highs and providing ample safety cushion for cumulative Q1-Q3 performance. However, in the secondary market, the sector has experienced long-term stagnation. Since the beginning of 2025, the negative excess return relative to the broader market hit an extreme low of approximately negative 40% at the end of May, with over 20% of recovery space still remaining. As of September 7, 2026, the brokerage sector's price-to-book (PB) ratio stands at only approximately 1.27x, situated in the absolute low percentile range of 16.1% over the past decade. The scissors gap between continuously improving fundamentals and deeply discounted valuations has reached an extreme state, breeding powerful upward mean-reversion momentum.
Risk warnings: Risks of declining market trading activity, underwhelming capital market reform progress, significant secondary market volatility, subpar exit performance of STAR Market projects, and compliance risks associated with overseas operations and cross-border regulatory requirements.