Open Source Securities: Active equity funds saw small net redemptions in August, bullish on non-bank financials under dividend style
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This research report from Kaiyuan Securities analyzes the non-bank financial sector in China for the week. Key findings include that active equity mutual funds experienced net redemptions in August despite a recovery in net asset values, with total equity fund assets rising 3.3% month-on-month to 11.4 trillion yuan but fund shares declining 1.2%. The report forecasts that securities firms' profitability and dividends will maintain rapid growth for the full year, with investment banking, direct investment, overseas, and wealth management businesses expected to show growth in Q3, potentially exceeding Q3 earnings expectations. It recommends overweighting leading securities firms with improving ROE. For insurers, the report notes the China Insurance Association is soliciting opinions on standard clauses for medical insurance, which could support healthy development of health insurance. It recommends high-dividend-yield insurers like China Pacific Insurance, Ping An, and PICC P&C, citing stable profit growth and dividend prospects. The report also recommends Jiangsu Financial Leasing for its high dividend yield and stable earnings growth.
Source report
Weekly View: Net Redemptions in Active Equity Funds in August; Non-Bank Opportunities Under Dividend Yield Characteristics
From a full-year perspective, securities firms are expected to maintain relatively fast growth in profitability and dividends. Investment banking, direct investment, overseas operations, and wealth management are likely to sustain growth momentum in Q3, with potential for Q3 results to exceed expectations. We favor excess returns for leading securities firms with a rising ROE中枢 and sustained improvement. Listed insurers are expected to see steady growth in full-year profitability and dividends. We favor investment opportunities under a dividend yield style for high-dividend-yield targets, and recommend Jiangsu Financial Leasing for its high dividend yield and sustained steady profit growth.
Securities Firms: Equity Fund Scale Up 3.3% MoM in August; Favor Revaluation of Leading Firms
- This week: Average daily stock and fund turnover was RMB 2.26 trillion, down 2.8% week-on-week. Year-to-date cumulative average daily turnover stands at RMB 3.12 trillion, up 63.6% year-on-year.
- August mutual fund data (AMAC):
- Non-money-market and equity-oriented funds (excluding money market and bond funds) reached scales of RMB 23.3 trillion and RMB 11.4 trillion, up 1.7% and 3.3% month-on-month, respectively.
- Shares stood at 17.6 trillion and 7.9 trillion units, down 0.8% and 1.2% month-on-month, respectively.
- Net asset value (NAV) increased by 2.5% and 4.6% month-on-month, respectively. The NAV recovery in August led to net redemptions in both non-money-market and equity-oriented funds.
- Equity ETFs: Scale of RMB 2.7 trillion, down 0.6% month-on-month; shares of 2.3 trillion units, down 2.4% month-on-month.
- Active equity funds (excluding ETFs): Scale of RMB 8.6 trillion, up 4.6% month-on-month; shares of 5.6 billion units, down 0.7% month-on-month, indicating slight net redemptions.
- Other fund types (August):
- Bond funds: Scale +0.1% MoM, shares -0.6% MoM, NAV +0.7% MoM.
- FOFs: Scale -1.0% MoM, shares -2.4% MoM, NAV +1.4% MoM.
- QDII funds: Scale +1.4% MoM, shares -0.6% MoM, NAV +1.4% MoM.
- Bond funds, FOFs, and QDII funds all experienced net redemptions amid NAV recovery.
- Outlook for securities firms:
- Valuation and positioning are favorable.
- Both earnings and dividends grew strongly in the first half.
- Three key narratives—business transformation (overseas and wealth management), market share gains by leading firms, and a gradual bull market environment—are expected to drive sustained profitability and a higher ROE中枢 for leading securities firms.
- We favor valuation revaluation and excess returns for leading securities firms.
Insurance: CIIA Solicits Comments on Model Clauses for Medical Insurance; Favor Dividend Yield Advantage Under Style-Driven Market
- Regulatory update: 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 costs, "the model clauses clarify that the list of specific drugs agreed upon by the insurer must include the commercial health insurance drug coverage list 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 benefit the high-quality development of health insurance.
- Sector outlook:
- Valuation and institutional holdings remain at low levels.
- The logic of stabilizing interest rate spreads—driven by long-term interest rates oscillating at the bottom and continuously declining liability costs—remains intact.
- Growth in premium income, supported by deposit migration, is expected to continue.
- The industry's long-term logic supports a rebound in sector valuation.
- Q3 data on investment performance, liabilities, and combined ratio (COR) may weaken on a sequential or year-on-year basis, making investment style the primary driver.
- Recommendations: High-dividend-yield stocks: 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, CITIC Securities (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.
Source
开源证券Eastern