Hong Kong's brokerage sector has launched a full-scale offensive, with securities and brokerage stocks surging over 30% in just three weeks. This rally, mirrored in A-shares, has ignited a phased bull market led by financial institutions. Since April 7, when Trump reignited tariff wars, the sector has maintained steady gains, accelerating in July due to policy tailwinds, undervaluation, and sector rotation. Year-to-date, the segment has soared 36.9%, propelling the Hang Seng Index's 21.5% climb. GUOTAI JUNAN I (01788) spearheaded the advance with its market capitalization quadrupling. Gains spread broadly across the sector: major blue-chips like Haitong Securities and GF Securities rose 38% and 49% respectively, while industry leader CITIC Securities gained over 25%.

What fuels this bull run, and can momentum persist? Industrial Securities research identifies seven similar 20%+ surges since 2010, all catalyzed by "domestic policy easing + stock market stimulus" coupled with "overseas liquidity expansion + risk mitigation." Current drivers align perfectly: state-backed market stabilization amid tariff pressures and swift implementation of the May 7 Policy Package. Brokerages now lead market advances with notable continuity, as growth sectors like TMT, defense, biotech, and commodity plays outperform since the April low.

Three powerful engines could sustain the rally: 1. **Policy Thrust**: Since September 2024, capital market support has intensified. The Securities-Fund-Insurance Swap Facility (SFISF) and Stock Buyback Relending Scheme injected over ¥100 billion. Recent guidelines merged these tools into an ¥800 billion liquidity pool. Dual-listings (A+H) and southbound fund inflows expanded further after June 10 rules enabled Greater Bay Area firms to list in Shenzhen. Supply-side reforms accelerated on July 11 with 28 measures to strengthen leading brokers. 2. **Valuation Springboard**: Stocks trade below book value (average PB 0.86x excluding GUOTAI JUNAN I), with quality players at single-digit PEs—Huatai Securities (8.2x), GF Securities (10x), and China Galaxy (8.4x). This creates substantial margin of safety despite geopolitical uncertainties. 3. **Earnings Rocket**: Explosive profit growth emerged in 2025 forecasts: Zhongtai Securities (+80.09% H1), Founder Securities (+70-80%), China Securities (+55-60%), CICC (+55-78%), with Changjiang Securities (+110-130%) and GUOTAI JUNAN I (+161-202%) leading. Sector gains of 37% lag far behind average earnings growth, signaling valuation catch-up potential—especially for undervalued blue-chips.

This brokerage-led bull phase appears far from exhaustion, though structural rotation will persist. Capital may oscillate between AI applications (smart driving/robotics), biotech, defense, and new consumption themes, potentially lifting the Hang Seng in stepwise fashion. Investors should focus on quality brokers with robust fundamentals and discounted valuations.