Profitable business makes your profit
Whenever a major market recovery is on the horizon, the performance of the securities sector often becomes the market's focus. How has the securities sector performed in this round of market recovery?
The main driver of this round of market recovery, known as the 923 market recovery, is due to significant changes in policy expectations. There is a logical chain in the A-share market that goes from "policy bottom → market bottom → economic bottom." As the financial sector is part of the virtual economy, it has a faster feedback speed on high-frequency data. For instance, high-frequency data reflecting the real economy is often disclosed on a monthly basis, while stock prices and trading volumes in the A-share market are disclosed daily, and even every minute and second during trading hours, making it more flexible. Therefore, the financial sector, as part of the virtual economy, is expected to improve before the real economy.
Within the large financial industry, the securities sector's brokerage business (stock account opening), proprietary investment business, investment banking business, and wealth management business are all closely related to the performance of the A-share market. If the A-share market performs well, the main businesses of the securities sector are directly stimulated. Thus, the securities sector can be considered the "vanguard" of the A-share market and is a high-elasticity asset.
In terms of data, from September 23 to the end of September, the non-bank financial sector (with securities as the representative industry of the non-bank financial sector) rose by 36%, and the securities sector rose by 39%, demonstrating a more significant high-elasticity characteristic.
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Looking ahead, the securities sector is still expected to benefit from a multi-dimensional resonance of favorable factors and continue to perform well:
(1) Policy side: This round of the market recovery is driven by policy, and it is worth paying attention to the key points emphasized by the policy. The contents mentioned in two high-level meetings on September 23 and 26 are highly relevant to the securities industry, such as "promoting medium and long-term capital into the market," "striving to boost the capital market," "stock buybacks and increased loans," and "convenience of swaps between securities funds and insurance companies." These are expected to continue stimulating the profit expectations of the securities industry.
For example, when policies boost the capital market, market confidence is boosted, and activity increases. If trading volumes increase, it may benefit the brokerage business of securities firms.
Supporting mergers and acquisitions markets through various measures, in the securities firm's investment banking business, if there is an increase in mergers and acquisitions business, it may compensate for the previous decline in IPO underwriting revenue.
As the return on stock market investments increases, the income from securities firms' proprietary investments using their own capital is expected to grow rapidly.
(2) Capital side: Some friends may worry that with such a "sharp" increase in the securities sector in the short term, will there be additional funds willing to buy in the future?The movements of large institutional investors may be worth paying attention to. Looking at the holding data from the past 10 years, the fund holdings in the securities sector reached a peak of 6.2% in the fourth quarter of 2014, and then fluctuated downwards, with the latest data for the second quarter of this year being only 0.14%. Therefore, the "starting point" of this round of the securities sector's market is relatively low, and there may be ample space for institutional investors to enter in the future.
(3) Industry perspective: After the valuation of the sector is repaired, long-term growth in the future requires an industry "story," and the "story" of the securities sector is being told and performed vigorously, which is mergers and acquisitions.
For the securities industry, mergers and acquisitions can integrate the strengths of two different securities firms, complement each other's shortcomings, and achieve a synergistic effect of "1+1>2." Both parties involved in mergers and acquisitions often see a significant boost in valuation. For example, just in September this year, there was the "first single" domestic merger and acquisition of two leading securities firms, which set a leading example for the entire securities industry. If the number of merger and acquisition cases continues to increase in the future, the upward valuation space for the securities sector may expand.
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