According to a research report from Gf Securities Co.,Ltd., the July Central Political Bureau meeting proposed to enhance the attractiveness and inclusiveness of the domestic capital market and consolidate the momentum of capital market recovery and improvement. The shift from "stabilizing the stock market" to "attractiveness" represents a transition from "stability" to "progress." "Attractiveness" is reflected in the continuous inflow of incremental domestic and foreign capital, while "inclusiveness" is demonstrated through capital market investment and financing reforms that better serve the development of new quality productive forces.

In Q2 2025, the public fund shareholding ratio in the securities sector increased from 0.37% in Q1 to 0.64%, but remains at historically low levels. With incremental capital entering the market in relay fashion, performance and valuation space are opening up, leading to a strategic bullish outlook on allocation opportunities in the securities sector.

**Incremental Capital Expected to Enter Market in Relay Fashion, Securities Business Expected to Benefit Comprehensively**

According to Wind data, domestic market leverage and active capital have shown signs of recovery, but the margin trading turnover ratio of less than 10% at the end of July 2025 still has significant room for improvement compared to historical highs. The conversion and market entry of household savings is just beginning. As of the end of June, domestic total savings balance increased from 93 trillion yuan at the end of 2020 to 162 trillion yuan. Considering the rise in the proportion of household excess savings to high levels and the accumulation of deposit term structuring, there remains significant room for future deposit activation and the shift from savings to investment.

Monthly account opening numbers have steadily increased from low points, potentially catalyzing a "slow bull market." Policy guidance for long-term capital to continuously enter the market faces a structural adjustment turning point. Under low interest rates and asset scarcity, the equity allocation ratios of insurance funds, wealth management products, and public funds are all expected to bottom out and recover.

The relay entry of incremental capital opens growth space for securities firms' brokerage, margin financing, asset management, and investment banking businesses. The securities industry is expected to enter a new round of growth.

**Self-Operated Structure at Adjustment Turning Point, Performance Elasticity Expected to Expand**

Since 2018, with the trend decline in long-term interest rates, bond market returns have driven the continuous increase in the proportion of fixed-income assets, with some securities firms' risk control indicators approaching warning lines. Years of "bond bull market" have resulted in relatively extreme capital allocation. In the low interest rate era, as long-term rates decline and dividend yields increase, the attractiveness of equity markets is gradually strengthening, equity allocation space is gradually opening up, which is expected to enhance securities firms' performance elasticity.

At the end of 2024, the average self-operated equity proportion to net capital ratio among listed securities firms was 20.2%, still having 42% room for improvement compared to the high point since 2016.

**Asset Quality Continues to Improve, Valuation Concerns Alleviated**

Since 2023, multiple measures have been implemented to mitigate local debt risks. According to the IMF's Financial System Stability Assessment (FSSA) report on China, by the end of 2024, China's local government financing platform debt balance was approximately 15 trillion yuan, down 25% year-on-year. 40% of local financing platforms have transformed into market-oriented enterprises or been cleared out.

Since 2024, the real estate policy "combination punch" has shown significant effects. Under high-quality development trends, market confidence has steadily strengthened. The mitigation of urban investment and real estate risks has reduced financial institutions' "non-standard" risks. The decline in securities firms' on-balance-sheet impairment scale and proportion objectively reflects the continuous improvement in securities firms' asset quality.

The combined impairment of 43 listed securities firms peaked in 2020 and then declined significantly.

**Cost Reduction and Efficiency Improvement Amplify Profit Elasticity with Revenue Recovery**

Staff reduction for efficiency and structural optimization go hand in hand. Starting from 2024, revenue growth resumed, management expenses stabilized, and industry employee numbers showed negative growth for the first time in ten years. Labor costs were effectively controlled, and the securities industry has passed the turning point of high costs.

In the future, seeking balance between cost reduction and efficiency improvement and long-term competitiveness, relying on digital transformation and intensive management control, the securities industry is expected to enter a sustained upward cycle of ROE.

**Risk Warning** Economic downturn exceeding expectations, significant market volatility, policy change risks.