Guoxin Securities: The concentration of the securities industry will further increase, and focus on recommending leading brokerage firms

The Zhitong Finance App learned that Guoxin Securities released a research report saying that focusing on the two main lines under strict supervision, it is determined that the concentration of the securities industry will further increase, institutional pricing power will be further deepened, asset management indexation will be further strengthened, and regulatory requirements will be further raised. We focus on recommending leading brokerage firms CITIC Securities (600030.SH) and Huatai Securities (601688.SH). It is recommended that Oriental Wealth (300059.SZ), which has deep traffic advantages and rich monetization licenses, integrate and promote smooth livelihood of the League of Nations (601456.SH).

Guoxin Securities's main views are as follows:

Recently, the Securities Regulatory Commission issued the “Regulations on Classification and Evaluation of Securities Companies (Revised Draft for Comments)”.

This revision comes at a critical time when China's capital market implements the new “Nine National Rules” and promotes financial supply-side structural reforms. The depth and breadth of the reforms surpass the past. Compared with the 2020 edition of the “Regulations on the Classification and Supervision of Securities Companies”, the new regulations have achieved three major strategic shifts in system design: from scale orientation to function orientation, from homogenized competition to differentiated development, and from compliance bottom line management to comprehensive risk management. These changes will have a profound impact on the strategic positioning, business structure, and industry ecology of securities companies.

In terms of business development, the business index system is optimized to support a differentiated competitive pattern.

First, there is equal emphasis on scale indicators and efficiency indicators. Remove the revenue ranking bonus points in the 2020 revised edition and increase the ROE bonus points instead. The second is to expand the scope of index evaluation, expand the revenue ranking coverage of traditional businesses such as brokerage, investment banking, and asset management from Top 20 to Top 30, and reduce the minimum bonus points to 0.25 points. This mechanism enables small and medium brokerage firms that focus on market segmentation to receive good reviews. The third is to add special development indicators to focus on guiding the development of businesses involving equity assets. In business fields such as proprietary investment, asset management, and fund sales, companies with a high share of equity assets get more points.

In terms of risk control and compliance, major risks are strictly controlled, and graded punishment mechanisms are set up.

First, major offenses are directly recognized as Class D. The second is to reduce the deduction of administrative penalties. The third is to increase the weight of eligibility penalties. Fourth, strengthen the responsibilities of directors and supervisors. The fifth is to add a compliance incentive mechanism.

In terms of industry influence, the Matthew effect in the securities industry continues, but small and medium-sized brokerage firms can differentiate and break the game.

The first is the consolidation and transformation of the advantages of leading brokerage firms. Traditional leaders have natural advantages in serving the country's strategic areas, capital strength, comprehensive licenses, business development and innovation, etc., but the cancellation of additional revenue points will weaken their scale advantage, and focusing on improving ROE will be a key focus in the future. Second, small to medium brokerage firms can break the game by differentiating themselves, such as establishing special labels on new tracks such as fund investment and market making business, or hitting the top 30 in some business segments, which is expected to get more extra points and get higher ratings.

The volume of transactions increased month-on-month, and most stock indexes rose.

(1) In terms of brokerage business, the average daily turnover of A-shares in June was 1,336 billion yuan, +10.0% month-on-month and +84.8% year-on-year. (2) In terms of investment banking business, the number of IPOs in June was 24, and the capital raised was 9.153.3 billion yuan, +164.8%; the refinancing scale in June was 542,058 billion yuan, 3963.9% month-on-month; and the underwriting scale of corporate bonds and corporate bonds in June was 502.6 billion yuan, +71.59%. (3) In terms of proprietary business, the Shanghai Composite Index +4.88%, the Shanghai and Shenzhen 300 Index +2.50%, the GEM Index +8.02%, and the China Securities Full Debt Index +0.29%. (4) Judging from the balance of the two loans reflecting market risk appetite and activity, as of June 30, the balance of the two loans was $1850,452 billion, +3.42% over the previous month.

Risk warning: Economic recovery falls short of expectations; market competition intensifies; innovation is falling short of expectations, etc.