According to Zhituo Finance APP, Sinolink published a research report stating that looking ahead to 2025, liquidity is expected to further loosen, enhancing market stability and establishing a solid market bottom. The confirmation of an improved economic fundamental suggests that the stock market may rise further, which is Bullish for Brokerage sector valuations and performance. A review of past instances of liquidity easing shows that Brokerage valuations expanded to over 1.9X, while the current Brokerage valuation is only 1.6X, indicating some upward potential. Recommended strong beta business lines (equity investment elasticity + trading elasticity), as Brokerages will benefit more from the recovery of the equity market and merging and restructuring themes.

The main points of Sinolink are as follows:

The Politburo meeting mentioned "strengthening extraordinary counter-cyclical policy adjustments," "stabilizing the real estate and stock markets," and "moderate easing," which surpassed market expectations.

On December 9, 2024, the Political Bureau of the Communist Party of China held a meeting today, emphasizing the need to "implement a more proactive macro policy, expand domestic demand, promote the integration of technological innovation and industrial innovation development, and stabilize the real estate and stock markets," while also needing to "implement more proactive fiscal policies and moderately easing monetary policies, enrich and improve the policy toolkit, and strengthen extraordinary counter-cyclical adjustments."

In specific statements, the policy tone of "stabilizing the real estate and stock markets" is clearer compared to the past; monetary policy is shifting to "moderate easing," which was only implemented previously during the 2009-2010 period when large and medium/small deposit reserve ratios were cumulatively lowered by 2pct/4pct, and one-year lending and deposit rates were cumulatively lowered by 1.62pct/1.89pct; for the first time, "extraordinary" was mentioned.

Liquidity easing drives market trading volume, leading to increased valuations and improved profitability for the Brokerage sector. Since 2010, each round of monetary easing has shown high allocation value for the Brokerage sector. Reviewing the cycles of monetary easing since 2010 (from January 2012 to February 2013, from July 2014 to June 2015, from October 2018 to March 2019, and from June 2020 to July 2020), the SSE Composite Index’s increases during these four phases were 9%, 109%, 14%, and 14%, while the Brokerage Index grew 56%, 175%, 54%, and 29% respectively, all showing significant excess returns compared to the Large Cap.

With the dual benefits of favorable policies and a warming of capital, combined with this year's low base, it is expected that the Brokerage sector's performance and valuation will achieve dual enhancements next year. In the first three quarters of 2024, the market overall experienced a downturn, significantly pressuring Brokerage operational performance. Since September 24, favorable policies have been continuously introduced, and the swap convenience tool has increased equity exposure, which helps enhance the elasticity of equity markets upward against their profits. The bank expects that in 2025, Brokerage performance will experience a rebound from its bottom, with 2024 performance growth likely to achieve positive growth, and 2025 performance expected to realize double-digit growth.

Risk Warning

The advancement of Capital Markets reform is below expectations; there are extreme volatility risks in the equity market; and the macroeconomic recovery is not as expected.