Morgan Stanley: China Brokers | Asia Pacific: Catalyst Preview: What's Ahead?
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Morgan Stanley expects China's brokerage sector to benefit from steadily improving market conditions, regulatory support, and incremental policy easing throughout 2026. The report suggests brokers may perform well in the first half of 2026 as investors begin pricing in rising financing and institutional business volumes. Ultimately, investor interest will concentrate on firms capable of delivering higher ROE under favorable market conditions and consolidating market share organically or through M&A.
The industry rating is Attractive. Key catalysts identified for CICC (3908.HK), CITIC Securities (600030.SS), and GF Securities (1776.HK) include potential leverage relaxation for major brokers, window guidance easing on short selling and derivatives, and a pickup in high-profile IPOs and monthly IPO volumes during Q1 2026. Further M&A activity within the sector is anticipated in Q2 2026.
Valuations utilize P/B to ROE regression analysis across base, bull, and bear scenarios. CITIC Securities carries a target P/B of 1.61x, reflecting a 30% A-H premium, while GF Securities trades at a target P/B of 0.76x. Key downside risks include slower-than-expected macro recovery, geopolitical tensions, weaker investment banking rebounds, further Kangmei-related compensation, and cooling average daily turnover.