Currently, individual investors are still popular in entering the market, and market trading activity is expected to remain at a high level. The month-on-month decline in the number of accounts opened in December is still high year-on-year.
The Zhitong Finance App learned that Open Source Securities released a research report saying that recently, the second phase of the SFISF interchange facilitation tender was completed. The market welcomed incremental capital, and senior management set a policy to “stabilize the property market and stock market” and focus on introducing policies to promote the entry of medium- to long-term capital into the market. Currently, individual investors are still popular in entering the market, and market trading activity is expected to remain at a high level. The month-on-month decline in the number of accounts opened in December is still high year-on-year. Focus on the central increase in market turnover and turnover rates, which is beneficial to the improvement of brokers' fundamentals. At the same time, profit improvements in traditional brokerage firms have not been fully reflected in valuations. We recommend leading undervalued brokerage firms, and we are optimistic about small and medium-sized brokerage firms with outstanding retail advantages and high performance elasticity.
Incident: The Shanghai Stock Exchange revealed that the number of new A-share accounts opened in December 2024 was 1.989 million, -26% month-on-month, +75% year-on-year, and 25 million new accounts opened in 2024, +17% year-on-year. Dongxing Securities disclosed a performance forecast on January 7. Net profit due to mother is expected to increase 77% to 107% year-on-year in 2024.
The main views of Open Source Securities are as follows:
The number of accounts opened in December fell month-on-month and still increased year-on-year. Focus on the central increase in market turnover and turnover rates
(1) The month-on-month decline in account opening data in December is in line with expectations. It is worth noting that the year-on-year increase remained high (brokerage account opening has strong quarterly characteristics). The account opening data is a forward-looking indicator of incremental capital entering the market. Judging from the December data, individual investors are still popular in entering the market, which is expected to create favorable conditions for the central increase in market turnover in 2025. The first quarter was the peak of account opening for brokerage firms over the years. Focus on the year-on-year growth in the number of new account openings in January.
(2) The average daily turnover rate for the four months from October 2024 to January 2025 (as of 2025.1.7) was 2.64%/2.55%/2.07%/1.60%, respectively. The peak turnover rate in this round was close to the 2015 level. Focus on the valley level, which has a guiding effect on the subsequent turnover rate center. Since the “9.24” policy package, market confidence has been boosted. The Nine New Countries focus on investor protection and coordination of investment and financing. Measures such as strictly controlling listing entry, improving the quality of listed companies, encouraging dividends and repurchases, and introducing medium- to long-term capital are all beneficial to investors' sense of acquisition. In a market environment where individual investor participation has increased, the turnover rate is expected to exceed historical assumptions.
Profit improvements in traditional brokerage firms have not been fully reflected in valuations. Focus on the catalyst for the January pre-increase in performance announcements
The valuation of traditional brokerage firms is still low and does not fully reflect the profit improvement expectations for 2024 and 2025. The announcement of 2024 performance forecasts by brokerage firms in January 2025 may become a catalyst for the sector.
(1) The sharp rise in the bond market in the fourth quarter of 2024 combined with active stock market trading. The net profit of listed brokerage firms is expected to be +40% year-on-year in 2024. It is expected that a certain percentage of listed brokers' performance growth rate is expected to exceed 50%, meeting the requirements for regulatory disclosure of performance forecasts. After considering the 2024 results, brokers' valuations are still low (estimated to be 7.0% ROE vs. 1.14 times PB valuation of traditional listed brokerage firms in 2024).
(2) The performance base for the first quarter of 2025 is low (investment income from large proprietary businesses such as 2024Q1 derivatives is low). Under the assumption of average daily stock turnover of 1.1 trillion yuan (as of January 7, average daily stock turnover of 1.21 trillion yuan in January), the net profit of listed brokers in 2025Q1 is expected to increase by more than 60% year on year. Some small and medium brokerage firms and retail advantages highlight the stronger year-on-year flexibility of brokerage firms.
Recommend leading undervalued brokerage firms, and be optimistic about small and medium brokerage firms with outstanding retail advantages and high performance flexibility
The profit improvement of traditional brokerage firms has not been fully reflected in valuation. The January performance advance announcement is expected to be a sector catalyst, recommending leading undervalued brokerage firms, benefiting from Guotai Junan (601211.SH), which has outstanding Internet diversion advantages and a high share of retail revenue. Benefiting from Guoxin Securities (002736.SZ) and China Merchants Securities (06099,600999.SH), which benefit from the targets of Oriental Securities (03958,600958.SH) and First Venture (0097.279SH) SZ) .
Risk warning: Stock market fluctuations affect the return on the industry's proprietary investments; the persistence of high trading volumes driven by individual investors is uncertain.
