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China Brokers: Operational Improvement and Valuation Dispersion Create a Catch-Up Re-rating Opportunity

Institution
Morgan Stanley
Date
2026-04-10
Authors
Chiyao Huang, Richard Xu, CFA, Beryl Yang, Chenqian Liu
Company
China Brokerage Sector
Ticker
3908.HK, 6099.HK, 6030.HK, 300059.SZ, 6881.HK, 000776.SZ, 6866.HK
Industry
Capital Markets
Rating
Asia Pacific Industry View Attractive
BullishLow confidenceThe report argues that the divergence in operating trends and valuation multiples among Chinese brokers has created a clear re-rating opportunity, and that trading volume, IPOs, refinancings, and fund issuance all improved materially in 1Q26.
AuthorsChiyao Huang, Richard Xu, CFA, Beryl Yang, Chenqian Liu
CoverageAsia-Pacific
Business segmentsInvestment Banking、Derivatives、Brokerage、Wealth Management
Research firm divisions/subsidiariesMorgan Stanley Asia Limited（Other）

AI summary card

China Brokers: Operational Improvement and Valuation Dispersion Create a Catch-Up Re-rating Opportunity

Morgan Stanley believes that the clear rebound in A-share turnover, IPOs, refinancings, and fund launches in 1Q26 should allow leading brokers with strong institutional businesses to continue outperforming in 2026.

Industry view is Attractive; the report does not provide a single-stock target price or per-company rating changes.
China brokersCapital marketsRebound in trading activityConcentrated investment bankingDerivativesInstitutional business
  • 1Q26 A-share average daily turnover rose 71% YoY, 50% above the FY2025 level.
  • 1Q26 Hong Kong IPOs grew 490% YoY, A-share IPOs grew 40% YoY, and refinancings grew 90% YoY.
  • 1Q26 equity and hybrid fund launches grew 42% YoY, showing that the improvement in retail risk appetite has flowed through to institutional capital inflows.
  • CITICS announced 1Q26 revenue up 40% and profit up 54% YoY, indicating that broker earnings should remain resilient in the current environment.
  • The report believes brokers with strong institutional clients, investment banking, and derivatives capabilities should continue to outperform in 2026.

Report interpretation

Overview

This report focuses on the China brokerage sector and is titled "Time To Catch Up." Its core conclusion is that the recent improvement in brokerage operating trends and the clear divergence in valuation multiples may create a meaningful re-rating opportunity. The report covers or discusses companies such as China International Capital Corp. Ltd., China Merchants Securities Co Ltd, CITIC Securities Co., East Money Information Co Ltd, Galaxy Securities, GF Securities, and HTSC.

Core views

The report argues that the recovery in market activity and capital-markets financing is supporting an improvement in broker fundamentals. In 1Q26, A-share average daily turnover rose 71% YoY, while Hong Kong IPOs, A-share IPOs, and refinancings increased 490%, 40%, and 90% YoY, respectively; equity and hybrid fund launches grew 42% YoY, indicating that the improvement in retail risk appetite has translated into stronger institutional capital flows. Brokers with strong investment banking and institutional business capabilities are expected to benefit more, while the differentiation space for commoditized traditional brokerage business should remain limited.

Analysis framework

The report mainly compares business trends and market share changes among major Chinese brokers across dimensions such as trading activity, IPOs and refinancings, fund issuance, broker profitability, investment banking market share, derivatives notional principal, brokerage trading volume, and client margin balance share.

Methodology notes

  • Industry ViewMorgan Stanley Analyst Industry View

    Attractive

    Attractive means the analyst expects the covered industry to have an attractive risk-adjusted performance versus the relevant market benchmark over the next 12-18 months.

  • Stock RatingMorgan Stanley Relative Rating System

    Overweight、Equal-weight、Not-Rated、Underweight

    Morgan Stanley uses a relative rating system that typically measures risk-adjusted performance versus the average total return of the covered industry over the next 12-18 months; the excerpt does not provide the latest per-company rating or target price.

Asset mapping & comparison

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

  • China International Capital Corp. Ltd. (3908.HK)
    One of the covered companies; investment banking and derivatives are highlighted as beneficiary areas.
    Strengths
    2025 investment banking market share increased by 3.9 percentage points; equity derivatives notional principal rose 39% YoY.
    Weaknesses
    The report discloses that Morgan Stanley beneficially owned 1% or more of this company's Class A ordinary shares as of 2026-03-31, along with investment banking and service relationship disclosures.
    Comparison
    Along with CITICS, HTSC, and GFS, it stands to benefit from higher investment banking and derivatives share.
    Risks
    A decline in capital-markets activity, regulatory changes, conflict-of-interest disclosures, and volatility in derivatives business.
  • CITIC Securities Co. (6030.HK)
    One of the covered companies and repeatedly cited as a beneficiary of leading institutional business.
    Strengths
    1Q26 revenue guidance up 40% and profit up 54% YoY; 2025 investment banking market share increased by 4.2 percentage points; equity derivatives notional principal rose 29% YoY.
    Weaknesses
    Brokerage trading volume share increased by 1.3 percentage points, but fees declined as the mix shifted toward institutional and high-frequency trading, leaving commission income share broadly stable.
    Comparison
    Its investment banking market share gain was larger than that of CICC and HTSC; derivatives growth was lower than CICC's but higher than GFS's.
    Risks
    Fee pressure, brokerage commoditization, regulatory changes, and capital-markets cyclical volatility.
  • HTSC (6866.HK)
    One of the covered companies; the report says its investment banking share improved.
    Strengths
    2025 investment banking market share increased by 1.9 percentage points.
    Weaknesses
    The excerpt does not provide full details on its profit, derivatives notional principal, or brokerage market share.
    Comparison
    Its investment banking share gain was smaller than CITICS and CICC.
    Risks
    Changes in investment banking concentration, regulatory policy, and volatility in market financing activity.
  • GF Securities (000776.SZ)
    One of the covered companies; derivatives business is highlighted as a beneficiary area.
    Strengths
    2025 equity derivatives notional principal rose 19% YoY, and the share of investment income increased by 2.2 percentage points.
    Weaknesses
    The excerpt does not provide full details on investment banking share or profit performance.
    Comparison
    Its derivatives notional growth was lower than CICC's and CITICS's, but better than the decline seen at CMS and Galaxy.
    Risks
    Changes in institutional derivatives demand, final regulatory rules, and market volatility.
  • China Merchants Securities Co Ltd (6099.HK)
    One of the covered companies.
    Strengths
    Part of the group of major Chinese brokers discussed in the report.
    Weaknesses
    2025 equity derivatives notional principal fell 42% YoY.
    Comparison
    Derivatives business performance was weaker than CICC, CITICS, and GFS.
    Risks
    Declining derivatives share, changes in institutional demand, and volatility in capital-markets activity.
  • Galaxy Securities (6881.HK)
    One of the covered companies.
    Strengths
    Part of the group of major Chinese brokers discussed in the report.
    Weaknesses
    2025 equity derivatives notional principal fell 16% YoY.
    Comparison
    Derivatives business performance was weaker than CICC, CITICS, and GFS, but the decline was smaller than CMS's.
    Risks
    Declining derivatives share, regulatory changes, and fluctuations in market turnover.
  • East Money Information Co Ltd (300059.SZ)
    One of the covered companies; the report specifically mentions changes in its equity fund AUM share.
    Strengths
    Benefiting from the sector backdrop of improving retail risk appetite and a rebound in fund launches.
    Weaknesses
    The report estimates that its 2025 equity fund AUM market share declined by 56 basis points, possibly shifting to leading wealth-management banks and large internet platforms.
    Comparison
    Compared with brokers with stronger institutional businesses, East Money is under pressure in equity fund AUM share.
    Risks
    Intensifying wealth-management competition, loss of fund sales share, and volatility in retail risk appetite.

Key data

  • 1Q26 A-share average daily turnoverUp 71% YoY, 50% above the FY2025 levelIndicates a clear rebound in trading activity.
  • 1Q26 Hong Kong IPOsUp 490% YoYShows a sharp recovery in the Hong Kong financing market.
  • 1Q26 A-share IPOsUp 40% YoYImprovement in primary market activity in A-shares.
  • 1Q26 refinancingsUp 90% YoYThe recovery in refinancing activity supports investment banking revenue.
  • 1Q26 equity and hybrid fund launchesUp 42% YoYImprovement in retail risk appetite is driving institutional capital inflows.
  • CITICS 1Q26 earnings guidanceRevenue up 40%, profit up 54% YoYReflects earnings resilience among leading brokers in the current market environment.
  • 2025 investment banking market share changesCITICS, CICC, and HTSC up 4.2, 3.9, and 1.9 percentage points, respectivelyUnderwriting fees are concentrating toward leading institutions.
  • 2025 equity derivatives notional principal changesCICC, CITICS, and GFS up 39%, 29%, and 19% YoY; CMS and Galaxy down 42% and 16% YoY, respectivelyInstitutional investor demand is driving higher derivatives share for some leading brokers.

Impact & implications

If trading activity, financing activity, and institutional capital inflows continue to improve, broker earnings and valuations could receive simultaneous support. Structurally, brokers with stronger investment banking, derivatives, and institutional client capabilities are more likely to benefit; brokers relying solely on traditional brokerage have limited room for differentiation.

Risks

  • A decline in A-share and Hong Kong trading activity could weaken brokerage and trading-related revenue.
  • If IPOs, refinancings, and A-share fundraising reforms progress more slowly than expected, investment banking recovery could be affected.
  • There is uncertainty around the final rules for derivatives regulation, which could affect the expansion of institutional business.
  • Downward pressure on brokerage fees and commoditized competition could limit earnings upside.
  • Competition from wealth-management platforms and large internet platforms could shift fund AUM share.
  • Morgan Stanley has disclosed investment banking, non-investment banking, market-making, or other business relationships with some covered companies, so investors should pay attention to potential conflicts of interest.

What to watch

  • Progress in A-share fundraising reforms.
  • Whether leverage limits for leading brokers are raised.
  • Final implementation of derivatives regulatory rules.
  • Whether A-share average daily turnover can stay elevated.
  • Whether Hong Kong IPOs, A-share IPOs, and refinancings continue to improve.
  • The scale of equity and hybrid fund launches and retail risk appetite.
  • Changes in institutional business share for CITICS, CICC, HTSC, and GFS.
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