Open Source Securities: Active equity funds saw small net redemptions in August, bullish on non-bank opportunities under dividend style

From a full-year perspective, securities firms' profitability and dividends are expected to maintain relatively fast growth. Investment banking, direct investment, overseas operations, and wealth management are likely to sustain growth momentum in Q3, with Q3 results potentially exceeding expectations. We are optimistic about the excess returns of leading securities firms, supported by a rising ROE中枢 and sustained improvement. Listed insurance companies are expected to see steady growth in full-year profitability and dividends. We favor investment opportunities in high-dividend-yield stocks under the dividend style, particularly Jiangsu Financial Leasing, which offers high dividend yields and stable profit growth.

Securities Firms: Equity Fund Scale Up 3.3% MoM in August; Favorable Revaluation of Leading Firms

• This week, the average daily stock and fund turnover was RMB 2.26 trillion, down 2.8% week-on-week. The year-to-date cumulative daily average is RMB 3.12 trillion, up 63.6% year-on-year.
• According to data from the Asset Management Association of China (AMAC) for August, the scale of non-money-market and equity-oriented public funds (excluding money market and bond funds) stood at RMB 23.3 trillion and RMB 11.4 trillion, respectively, up 1.7% and 3.3% month-on-month. Shares were 17.6 trillion and 7.9 trillion units, down 0.8% and 1.2% month-on-month, while net asset value (NAV) rose 2.5% and 4.6% month-on-month. The recovery in NAV in August led to net redemptions in both non-money-market and equity-oriented funds.
• Among these, the scale of stock ETFs was RMB 2.7 trillion, down 0.6% month-on-month, with shares of 2.3 trillion units, down 2.4% month-on-month. Excluding ETFs, the scale of active equity funds was RMB 8.6 trillion, up 4.6% month-on-month, with shares of 5.6 billion units, down 0.7% month-on-month, indicating slight net redemptions.
• In August, the scale of bond funds, FOFs, and QDII funds changed by +0.1%, -1.0%, and +1.4% month-on-month, respectively. Shares changed by -0.6%, -2.4%, and -0.6%, while NAV changed by +0.7%, +1.4%, and +1.4%. All three categories experienced net redemptions amid NAV recovery.
• The securities sector benefits from favorable valuation and positioning. Mid-year reports showed strong growth in both profitability and dividends. Three key narratives—business transformation (overseas and wealth management), rising market share among leaders, and a slow bull market environment—are expected to drive sustained profitability and a higher ROE中枢 for leading firms. We see revaluation and excess return opportunities for top-tier securities firms.

Insurance: CIIA Solicits Comments on Model Clauses for Medical Insurance; Dividend Advantage Under Style-Driven Market

• According to Caixin, on September 16, the China Insurance Industry Association (CIIA) released three draft model clauses for public comment, covering short-term medical insurance, long-term medical insurance, and Huiminbao (city-customized supplemental medical insurance). Model clauses serve as industry-standard reference texts for standardizing insurance contract content. In the drafting notes, the CIIA stated that regarding coverage for specific drug expenses, "the model clauses clarify that the list of specific drugs agreed upon by the insurer must include the drug coverage list for commercial health insurance published by the CIIA." This implies that once the CIIA's drug list is finalized, it will become an industry standard for determining drug coverage in various medical insurance products, in conjunction with the model clauses. We believe that the standardization and expansion of coverage for drugs and other services will support the high-quality development of health insurance.
• The insurance sector remains at low valuation and institutional positioning levels. The logic of stabilizing interest spreads—driven by long-term interest rates oscillating at the bottom and declining liability costs—continues to hold. Meanwhile, premium growth driven by deposit migration is expected to persist. These long-term industry dynamics support a recovery in sector valuations. While Q3 data on investment performance, liabilities, and combined ratio (COR) may weaken on a sequential and year-on-year basis, style factors are becoming the primary driver. We recommend high-dividend-yield stocks such as China Pacific Insurance, Ping An Insurance, and PICC Property and Casualty.

Recommended and Beneficiary Stock Portfolio

Recommended stocks: GF Securities, Jiangsu Financial Leasing, Huatai Securities, China Pacific Insurance, PICC Property and Casualty; CITIC Securities, China International Capital Corporation (H-shares), Ping An Insurance, Hundsun Technologies, Guotai Junan Securities, Hong Kong Exchanges and Clearing, Caitong Securities.

Risk Notes

• Volatility in capital markets may introduce uncertainty to investment returns.
• Insurance liabilities may underperform expectations.