March data reinforced J.P. Morgan's positive view on the China brokerage sector

Overview

This is a monthly report from J.P. Morgan on the China securities industry. The core conclusion is that March fundamentals remained strong despite geopolitical tensions and a share-price pullback: market turnover, new account openings, fund sales, Hong Kong IPO pipeline, and parts of the investment banking business all support a positive view on the brokerage sector. The report believes valuations are still undemanding, industry momentum is solid, and there may be buying opportunities ahead of the 1Q26 earnings season.

Core views

The report is bullish on the China brokerage sector, but stresses stock-level divergence. Leading brokers should benefit from investment banking, brokerage, and market-share gains, and may outperform the sector average; CICC is designated the short-term long because of its leading Hong Kong IPO market share, A/H IPO advantages, and expected earnings growth off a low base in 1Q25. Although Galaxy-H remains OW and is still inexpensive on valuation, it is used as the short leg in the 1-month pair trade because 4Q25 earnings missed expectations, 1Q25 had a high base, and there is potential impairment pressure.

Analysis framework

The report uses monthly high-frequency industry data tracking and stock-by-stock comparison, focusing on average daily A-share turnover, new account openings, margin financing and securities lending, stock pledges, IPO and refinancing volumes, bond underwriting, fund sales, AUM, major index performance, and company earnings expectations. Conclusions are cross-checked through industry data, share-price performance, and relative fundamentals of the covered names.

Methodology notes

• Industry fundamentals trackingMonthly operating metrics framework for the securities industry

  Use turnover, new accounts, margin financing, investment banking financing, fund sales, and asset management scale to gauge broker business momentum

  Broker revenue is highly correlated with capital-market activity. The report uses March turnover, new account openings, IPO/refinancing, bond underwriting, and asset-management data to judge marginal changes in brokerage, investment banking, capital intermediary, and asset-management businesses.

• Relative value trading1-month pair trade

  Long CICC-H, short Galaxy-H

  While maintaining a positive sector view, the report expresses the trade through relative performance within the industry: it chooses CICC-H, which has stronger fundamental catalysts and better 1Q26 growth expectations, as the long, and Galaxy-H, which faces greater earnings pressure and downside revision risk, as the short.

• Earnings expectation analysisLow-base versus high-base comparison

  Compare the pressure and opportunity in 1Q26 year-over-year profit growth

  CICC benefits from a low 1Q25 base, and the report expects stronger 1Q26 profit growth; Galaxy faces a high 1Q25 base, 4Q25 earnings below expectations, and potential impairment pressure, so 1Q26 performance may come under pressure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CICC-H (3908.HK)

  The report recommends it as the 1-month long and also lists it as OW

  Strengths

  Leading Hong Kong IPO market share; both A-share and H-share IPO markets have been strong year to date in 2026; the merger process with Dongxing and Cinda Sec is progressing in line with management guidance; the low 1Q25 base supports 1Q26 profit growth.

  Weaknesses

  Still exposed to sector-wide risk appetite, equity-market volatility, and the investment banking cycle.

  Comparison

  Relative to Galaxy-H, the report views CICC-H as having stronger short-term earnings visibility and investment banking catalysts.

  Risks

  A slowdown in Hong Kong IPO activity, merger progress below expectations, weaker market turnover, or capital-market volatility could cap valuation.

• Galaxy-H (6881.HK)

  The report keeps its fundamental OW rating, but recommends it as the short leg in the 1-month pair trade

  Strengths

  Undemanding valuation; the report remains positive on the brokerage sector overall, so the long-term fundamental rating is unchanged.

  Weaknesses

  4Q25 earnings missed expectations, the 1Q25 base is high, and 1Q26 may face higher impairment costs and earnings pressure.

  Comparison

  Relative to CICC-H, Galaxy-H has weaker near-term earnings catalysts and could face further de-rating if earnings are revised down.

  Risks

  If sector sentiment recovers quickly, impairment pressure is lower than expected, or earnings beat expectations, the short trade could be hurt.

• China Merchants Securities A/H (600999.SS/6099.HK)

  The report lists it as OW and says it prefers CMS heading into the 1Q26 earnings season

  Strengths

  Share-price performance in March was relatively resilient, and the report includes it among its preferred brokerage names.

  Weaknesses

  The report provides less stock-specific detail than for CICC and Galaxy; it remains mainly influenced by industry turnover, investment banking, and market risk appetite.

  Comparison

  Among the covered brokers, CMS-H has performed more steadily than Galaxy-H.

  Risks

  A decline in market turnover, slower investment banking activity, or continued pressure on sector valuation.

• East Money-A (300059.SZ)

  The report lists it as OW and believes its risk/reward is turning attractive

  Strengths

  A leading player in the stock and balanced-fund installed base market share, benefiting from fund sales and improved investor sentiment.

  Weaknesses

  FY25 earnings were mentioned as one of the stock-level disappointments, possibly related to market and fixed-income investment exposure.

  Comparison

  Compared with traditional top brokerages, East Money is more leveraged to internet wealth management and fund-sales elasticity.

  Risks

  Fund-sales recovery may fall short of expectations, market turnover may weaken, investment returns may be volatile, or valuation may continue to compress.

• China brokerage sector

  The report is broadly bullish

  Strengths

  Turnover, new account openings, fund sales, Hong Kong IPO pipeline, and investment banking data are all strong; leading brokers' ROE and market-share performance are better than the industry average.

  Weaknesses

  Around 15% of brokers were still loss-making in 2025, and industry ROE was 6.79%, below the roughly 10% level for the covered brokers, showing clear divergence.

  Comparison

  Leading brokers may continue taking market share from smaller peers.

  Risks

  Geopolitical tensions, equity-market declines, pressure on investment income, higher impairment costs, and weaker investor risk appetite.

Key data

• March average daily A-share turnoverRmb2.45trnUp 6% m/m and 60% y/y, keeping brokerage activity at a high level.
• New securities accounts opened in March4.6mnUp 82% m/m, the third-highest level since September 2024.
• March mutual fund salesRmb110bnUp 38% m/m and 21% y/y, showing a recovery in investor sentiment.
• March margin financing balanceRmb2.61trnDown 2% m/m and up 36% y/y; the balance equals 2.7% of A-share free-float market cap.
• March stock pledge balanceRmb2.92trnDown 8% m/m and up 3% y/y; roughly 3.0% of A-share free-float market cap.
• March A-share IPO financing volumeRmb11bnUp 77% m/m and 17% y/y; CICC had the strongest market share.
• March A-share refinancing volumeRmb63bnUp 80% m/m.
• March bond underwriting volumeRmb1.28trnUp 66% m/m and 3% y/y.
• February non-money-market fund AUMRmb22.8trnUp 1% m/m.
• February broker asset-management AUMRmb6.6trnUp 2% m/m.
• Broker stock performance in MarchA-shares -12%, H-shares -15%Underperformed the CSI 300 by about 6 percentage points and the HSCEI by about 10 percentage points, which the report attributes mainly to risk-off sentiment amid geopolitical tensions.
• Companies and ratings listed in the report6881.HK HK$8.39/OW; 3908.HK HK$18.25/OW; 600999.SS Rmb15.89/OW; 6099.HK HK$13.67/OW; 300059.SZ Rmb19.49/OWPrices as of the 2026-04-08 close.

Impact & implications

The investment implication of the report is that short-term share-price weakness in China brokerage stocks has diverged from strong fundamentals; sector beta remains attractive, but stock selection needs to center on underwriting market share, earnings base effects, investment income, and impairment risk. CICC and CMS are more favored by the report, East Money's risk/reward has improved, while Galaxy-H may underperform in the short term because of earnings pressure and downgrade risk.

Risks

• Geopolitical tensions may continue to drive risk reduction among investors and suppress broker valuations.
• A decline in equities would affect IPO follow-on investment, proprietary equity trading, and investment income.
• Individual names such as Galaxy may face higher impairment costs and earnings downgrades.
• If Hong Kong IPO activity or A-share financing slows, investment banking momentum will weaken.
• If turnover and new account openings retreat from high levels, brokerage revenue may come under pressure.
• Brokers with larger fixed-income investment exposure may be affected by yield volatility.

What to watch

• 1Q26 broker earnings releases, especially profit growth and impairment trends at CICC, CMS, Galaxy, and East Money.
• Whether average daily A-share turnover can remain elevated and whether new account openings continue to improve.
• The IPO queue and issuance pace in Hong Kong, especially changes in CICC's share of the A/H IPO market.
• The sustainability of rebounds in major indices such as the CSI 300 and STAR 50 in April and beyond.
• Changes in margin financing and securities lending balances, maintenance margin ratios, and stock pledge balances.
• Whether fund sales and non-money-market fund AUM continue to recover.