Brokerage stocks surged on June 16 early trading, with Jinlong Shares (000712) hitting the daily limit and Guosheng Securities (002670), East Money (300059), and China Galaxy Securities (601696) following gains. Analysts attribute the rally to three factors: easing overseas risks improving market risk appetite, extremely low valuations with the brokerage index price-to-book ratio at near-decade lows below the 1% historical percentile, and fund rotation from technology sectors to undervalued financials. The movement follows a sector-wide rally on June 15 when the non-bank financial sector rose over 2%, with China Galaxy Securities hitting two consecutive daily limits and multiple brokerages gaining over 4%.
Jinlong Shares Hits Daily Limit on June 16 Trading
Jinlong Shares (000712) touched the daily limit during June 16 early trading session. Guosheng Securities (002670), East Money (300059), and China Galaxy Securities (601696) followed with gains during the same session.
Non-Bank Financial Sector Rises Over 2% on June 15
On June 15, the non-bank financial sector under the Shenwan primary industry classification rose over 2% for the full trading day. China Galaxy Securities hit two consecutive daily limits. Huaan Securities (600909) and Changjiang Securities (000783) touched daily limits intraday and closed with gains exceeding 7%. East Money, Caida Securities (600906), and China Merchants Securities (600999) all gained over 4%.
Analysts Cite Three Factors Behind Brokerage Stock Rally
A brokerage strategy analyst told The Paper that three main reasons explain the brokerage stock movements. First, overseas disruptions showed major easing signals, significantly improving market risk appetite. Second, valuation factors play a role, as the current brokerage index overall price-to-book ratio sits at an extremely low percentile over the past decade, providing strong valuation repair momentum.
Guotai Haitong Securities stated that the brokerage sector was disturbed by capital flow factors and other elements in the earlier period, with sector valuations adjusting to historical lows. Currently, the brokerage sector's price-to-book ratio relative to the overall market is below the 1% historical percentile, showing severe mismatch between performance and valuation.
The strategy analyst further pointed out the third factor: under recent market rebalancing, capital began switching to large financials and other non-technology sectors. "As the technology sector strengthens again, it cannot be ruled out that earlier funds, after taking profits, are switching from high-level themes to the brokerage sector with low valuations, high elasticity, and improving performance," the analyst said.
Kaiyuan Securities also noted that recent capital flows show signs of moving toward low-valuation, non-bank sectors with improving interim report performance.
Policy Support and Performance Outlook for Brokerage Sector
Analysis institutions point out that brokerages currently face positive expectations across all business lines for interim report outlook and policy support.
On performance expectations, Kaiyuan Securities believes that second-quarter capital flow pressure is expected to be lifted, refinancing uncertainty has landed, and IPO expansion benefits brokerage investment banking and investment chain profit growth. Second-quarter brokerage performance is expected to continue exceeding expectations.
On policy aspects, Guotai Haitong stated that fund investment style supervision self-discipline rules were released, strengthening thematic fund supervision and management, and strictly controlling style drift. With regulators strictly controlling style drift and improving investor holding experience, in a low interest rate environment, household deposits have momentum to move toward high-yield assets, with brokerages continuously benefiting as equity asset intermediaries.
Analysts Debate Sustainability of Brokerage Stock Rally
Chen Guo, Deputy Director of East Money Securities Research Institute, stated: "I recently proposed being bullish on A-shares, with structural rebalancing. Over the past period, A-share performance has actually been better than the market's previous consensus expectations, and overall has clearly begun shifting toward rebalancing relative to May's extreme differentiation. The rational choice for rebalancing now includes assets such as non-bank financials."
Guotai Haitong Securities stated it is bullish on household deposits moving to asset management products such as public funds in a low interest rate environment, recommending increased holdings in brokerages.
Kaiyuan Securities reminds investors to pay attention to the continued improvement of brokerage ROE under three major medium- and long-term narratives: first, the historical opportunity of wealth management under deposit migration; second, overseas balance sheet expansion under cross-border demand; third, the launch of investment banking and investment business under the technology wave.
On investment opportunities in brokerage stocks, China Merchants Securities stated that with overall sector capital flow pressure clearing, it is bullish on technology innovation investment banking realizing performance elasticity in the short term, international development raising ROE center in the medium term, and wealth management in the long term.
However, multiple institutions believe that the current market mainline remains technology industries with higher prosperity, and high-to-low rotation is only a short-term phenomenon.
The aforementioned brokerage strategy analyst stated: "From the market perspective, brokerage stocks showed a certain degree of pullback after rushing higher on early Monday trading, and the sector's overall gains still lagged behind technology. Electronics and communications sectors rose over 6% on Monday. Although there is a certain degree of high-to-low rotation, overall technology remains the mainline currently."
Huaan Securities also pointed out that high-to-low rotation is only a short-term phenomenon and difficult to sustain, especially against the background of risk appetite expected to be significantly boosted. Opportunities will return to industrial trend mainlines, continuing to emphasize the core positioning of medium-term industrial mainline directions. On allocation thinking, industrial trends are clear and market performance is far from over. Grasping industrial opportunities is the top priority, and adjustments provide entry opportunities rather than risks.
FAQ
What caused brokerage stocks to surge on June 16?
Analysts cite three main factors: easing overseas risks improving market risk appetite, extremely low valuations with the brokerage sector price-to-book ratio below the 1% historical percentile, and fund rotation from technology sectors to undervalued large financials.
How did brokerage stocks perform on June 15?
The non-bank financial sector rose over 2% on June 15. China Galaxy Securities hit two consecutive daily limits, while Huaan Securities and Changjiang Securities closed with gains exceeding 7%. East Money, Caida Securities, and China Merchants Securities all gained over 4%.
