By Yu Hong
Recently, New China Life Insurance Company Limited (hereinafter "New China Insurance") increased its holdings in the H shares of Guotai Haitong Securities, triggering a public disclosure requirement. Amidst active capital market trading and significant improvements in securities firms' performance, the securities sector—offering both earnings growth and valuation advantages—is attracting increasing attention from market investors.
On 10 9, New China Life Insurance announced that on 9 29, it increased its holdings of Guotai Haitong Securities H shares by 995.96 million shares via central bidding transactions in the secondary market, representing approximately 0.28% of the company's total issued H share capital. Following this change, New China Life and its concert parties now hold a combined total of 7.1 billion H shares of Guotai Haitong Securities, with their stake rising from 19.96% to 20.24%.
As of the close on 10/9, the closing price of Guotai Haitong Securities' H-shares was 14.23 HKD per share, with a dividend yield of 5.24% over the past 12 months. As of 9/29, Xinhua Insurance's book balance for its holdings in Guotai Haitong Securities H-shares was 89.7 billion RMB, representing 0.48% of its total assets at the end of the previous quarter.
Since the beginning of the year, the merger and acquisition synergy between Guotai Junhe Securities has fully materialized. As of the end of the first half, total assets reached 2.5 trillion yuan, up 18.34% from year-end last year; revenue totaled 471.63 billion yuan, and net profit attributable to parent company shareholders amounted to 202.6 billion yuan, representing year-over-year growth of 97.56% and 28.74%, respectively.
Previously, New China Life Insurance also increased its holdings in Guotai Haitong Securities H-shares multiple times: it added 1488.16 million shares on 9/16, and separately added 250 million shares on 9/3 and 7/15. Beyond Guotai Haitong Securities, other brokerages' H-shares have also attracted institutional interest. For example, on 7/16, BlackRock increased its holding in Huatai Securities H-shares by 392.68 million shares, raising its long position stake from 5.95% to 6.18%.
Wang Hongying, President of the China (Hong Kong) Financial Derivatives Investment Research Institute, told reporters from Securities Daily that the main reasons for institutional investors increasing their holdings in brokerages' H-shares are twofold.
First, profitability is improving. Sustained market activity has strongly boosted brokerages' earnings growth, while dividend payouts have steadily increased. Additionally, brokers are accelerating their expansion into overseas markets and investments in innovative technology, further strengthening profit momentum. Industry ROE (Return on Equity) is expected to rise further.
Second, on the valuation front, the brokerage sector still has room for multiple expansion. H-shares trade at a discount to A-shares, offering institutional investors a margin of safety and compelling value.
From the perspective of brokerages' performance in the first half of the year, 43 A-share listed brokerages reported combined operating revenue of 3647.1 billion yuan, up 45.87% year over year; net profit attributable to parent company was 1553.7 billion yuan, up 49.01% year over year. Looking ahead to Q3 results, Wang Siyue, non-banking financial analyst at CICC, stated: "We expect listed brokerages' Q3 net profit attributable to parent company to grow 15.5% year over year, and the first nine months' net profit (adjusted) to increase 30.2% year over year."
According to Gao Chao, Chief Researcher for the Non-Banking Financial Industry at Kaiyuan Securities, top-tier brokerages are expected to exceed third-quarter earnings forecasts, demonstrating strong profit resilience. The persistent mismatch between elevated ROE centers and sustained profitability growth versus current ultra-low valuation levels presents a compelling case for re-rating of top brokerages and opportunities for excess returns.
