China securities brokerage industry Report Interpretation

Overview

This monthly China brokerage-sector bulletin argues that retail activity is normalizing while institutional business remains comparatively resilient. J.P. Morgan favors institutional franchises into 2H26 and identifies CICC-H as a preferred one-month long against Galaxy-H.

Core views

J.P. Morgan's central call is that August data support its view of “retail normalizing and institutional accelerating” in 2H26. Retail momentum weakened: A-share average daily turnover fell 17% month on month and 2% year on year to Rmb2.26tn, new brokerage-account openings declined 10% month on month and 10% year on year to 2.4mn, and monthly mutual-fund sales fell 33% month on month and 53% year on year to Rmb55bn. The report therefore expects brokers' equity-brokerage business to weaken sequentially in August. Margin financing was relatively steadier, with the outstanding balance at Rmb2.66tn, up 2% month on month and 18% year on year, although its share of tradable A-share market capitalization slipped 0.1 percentage point to 2.6%. Institutional activity offers an offset. Although A-share IPO flow fell 77% month on month to Rmb22bn in August, it was still 439% higher year on year; bond-underwriting flow rose 12% month on month and 17% year on year to Rmb1.68tn. IPO pipelines remain robust, with Citic Securities holding the largest A-share IPO pipeline and CICC the largest H-share pipeline. The report also cites Yangtze Memory Technologies' A-share IPO entering formal review and expects CXMT-related IPO co-investment income to support sector investment income in 3Q26, particularly for CMS and CICC. The report notes that 1H26 broker results generally exceeded its expectations, supported by investment and trading gains and solid fee and commission income. CICC, CMS, GTHT, GF Securities and Huatai delivered stronger-than-expected earnings, while East Money missed. It describes strong growth across major business lines, limited balance-sheet risk, continued overseas-business momentum and less pressure from “national team” selling as supportive factors. In August, CSI300 and STAR 50 rose 1% and 3% month on month, respectively, while the 10-year CGB yield fell 2.5bp; J.P. Morgan views this as slightly positive for IPO co-investment, equity proprietary trading and bond investment income. For 3Q26, J.P. Morgan identifies three investor focus areas: continued softening in turnover and margin-financing activity; a 27% 3Q-to-date decline in the STAR 50 Index, which could hurt brokers with larger IPO co-investment and proprietary-equity exposure, especially Guotai Haitong; and CXMT-related investment income, which should benefit CMS and CICC most. Asset-management indicators were softer as mutual-fund AUM excluding money-market funds fell 5% month on month to Rmb22.9tn in July, though broker asset-management-plan AUM rose 2% month on month to Rmb7.3tn. The one-month pair-trade idea is long CICC-H and short Galaxy-H. J.P. Morgan expects CICC to produce resilient 3Q26 results partly because of its CXMT investment, and cites management's medium-term ROE target of about 15%, versus 2026E consensus ROE of 11.6%; it expects upward consensus earnings revisions to support a re-rating. Galaxy is more exposed to retail brokerage, so the report expects greater pressure from falling turnover and softer margin activity. It also expects higher impairment charges at Galaxy in 3Q26 following the A-share market correction. Despite the tactical short leg, J.P. Morgan retains an OW fundamental rating on Galaxy-H, citing a positive sector view and undemanding valuation.

Analysis framework

J.P. Morgan reviews monthly operating indicators across retail brokerage, capital intermediation, investment banking, trading and asset management, then links them to likely 3Q26 earnings exposure by broker. It combines turnover, margin, IPO, underwriting, market and AUM data with relative valuation comparisons and company-specific business exposure.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Monthly activity tracking across turnover, account openings, fund sales, margin balances, IPO flows and AUM.

  The report uses changes in transaction volumes and related activity measures to assess the direction of brokerage, investment-banking and asset-management revenue momentum.

• Valuation methodsPB valuation

  Relative P/BV comparison for A-share and H-share brokers.

  The report compares forward price-to-book multiples across peers, noting sector averages of about 0.68x FY1 P/BV for H-share brokers and 1.01x FY1 P/BV for A-share brokers.

Asset mapping & comparison

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

• China International Capital Corporation (CICC-H, 3908.HK)

  Preferred long leg in J.P. Morgan's one-month CICC-H versus Galaxy-H pair trade.

  Strengths

  Expected resilient 3Q26 results, CXMT-related investment support, the largest H-share IPO pipeline, and management guidance for medium-term ROE of about 15%.

  Comparison

  Preferred over Galaxy-H because it has stronger institutional and CXMT-related support.

• China Galaxy Securities Co (Galaxy-H, 6881.HK)

  Short leg in J.P. Morgan's one-month pair trade, while retaining an OW fundamental rating.

  Strengths

  J.P. Morgan remains positive on the sector and views Galaxy's valuation as undemanding.

  Weaknesses

  Greater exposure to retail brokerage activity.

  Comparison

  Less favored than CICC-H on a one-month view because CICC is expected to have more resilient 3Q26 support.

  Risks

  J.P. Morgan expects declining turnover and softer margin financing to pressure the business and anticipates higher 3Q26 impairment charges after the A-share correction.

Key data

• A-share average daily turnoverRmb2.26tnAugust 2026; -17% m/m and -2% y/y.
• New brokerage account openings2.4mnAugust 2026; -10% m/m and -10% y/y.
• A-share IPO flowRmb22bnAugust 2026; -77% m/m and +439% y/y.
• Bond underwriting flowRmb1.68tnAugust 2026; +12% m/m and +17% y/y.
• Outstanding margin financing balanceRmb2.66tnAugust 2026; +2% m/m and +18% y/y.
• CICC medium-term ROE target~15%Compared with 2026E consensus ROE of 11.6%.

Impact & implications

The report expects the near-term earnings backdrop to favor brokers with institutional franchises, IPO pipelines and CXMT-related investment exposure over more retail-dependent firms. It sees CICC as positioned for resilient 3Q26 results, while Galaxy faces greater tactical pressure from retail-market weakness and possible impairment charges.

Risks

• The 27% 3Q-to-date decline in the STAR 50 Index could weigh on brokers with higher IPO co-investment and proprietary-equity exposure.
• Softer retail turnover, margin activity and fund sales could weaken brokerage and asset-management momentum.
• Galaxy may incur higher impairment charges in 3Q26 following the A-share market correction.

What to watch

• Further movement in A-share turnover and margin-financing activity during 3Q26.
• The effect of the STAR 50 Index decline on IPO co-investment and proprietary-equity trading income.
• CXMT-related investment income, particularly for CMS and CICC.
• IPO pipeline conversion and underwriting flows in the A-share and Hong Kong markets.