The first brokerage interim earnings preview has sent shockwaves through the market, with leading firm Guotai Haitong validating expectations of strong first-half performance growth for the sector by posting record-high semi-annual profits, both historically and within the industry, drawing market attention to the sector's valuation recovery potential.

According to the announcement, Guotai Haitong is expected to achieve a net profit attributable to shareholders of 20.003 billion to 20.511 billion yuan for the first half, setting a new historical high for the company's semi-annual performance and simultaneously refreshing the industry's semi-annual profit record. For the second quarter, Guotai Haitong is expected to achieve adjusted non-GAAP net profit of 13.538 billion to 14.046 billion yuan, representing a sequential increase of 137% to 146% compared to the first quarter of 2026, also setting a new historical high for the company's quarterly performance.

At present, the brokerage sector is being driven by at least three key factors:

First, as a bellwether for bull markets, the industry's performance is steadily recovering: A-share trading activity remains robust, with average daily turnover and margin financing balances staying at elevated levels. The fundamental outlook for brokerages continues to improve, market liquidity remains reasonably ample, investor sentiment is stabilizing, and household funds continue to flow into the capital markets, creating a relatively favorable operating environment for brokerages and strengthening the momentum for earnings recovery.

Second, as a 'tech catcher,' their holdings in technology stocks are appreciating: With the full implementation of the registration-based IPO system and the normalization of mandatory co-investment mechanisms for the STAR Market, the capital market listing of domestic hard-tech companies is accelerating. Brokerages, leveraging their roles in investment banking sponsorship, strategic co-investments on the STAR Market, and Pre-IPO direct investments, are building a full-lifecycle profit loop for tech companies. This is reshaping the industry's underlying profit logic and initiating a systematic value re-rating as they transition from cyclical intermediaries to 'hard-tech catchers'.

Third, attractive valuations are at decade lows: The brokerage sector was mostly in decline during the first half of the year, with the Securities Companies Index falling 7.87% during the period. Its price-to-book ratio (LF) stands at just 1.32 times, at the 22.94th percentile of the past decade, while its trailing price-to-earnings ratio is 15.29 times, at an even lower 4.12th percentile of the past decade. This low valuation diverges from the improving fundamental trend of the sector.

Returning to today's market action, the brokerage sector opened higher in the morning before consolidating. The leading brokerage ETF, Huabao Securities ETF (512000), with assets exceeding 40 billion yuan, saw its on-exchange price close up 0.18%, approaching its annual moving average, with funds net inflows of 1.574 billion yuan for the week. Most individual stocks gained, with Everbright Securities rising over 3%, while China International Capital Corporation Ltd., Guotai Haitong, and Shenwan Hongyuan gained over 2%. Huaxi Securities and Guosen Securities were among the top gainers.

Taking a longer-term view, the brokerage sector has shown periodic strength since June. From a weekly perspective, as of July 3rd, Huabao's Securities ETF (512000) has posted four consecutive weekly gains. The Securities Companies Index has accumulated a monthly increase of 8.27%, significantly outperforming the broader market, contrasting with its performance earlier in the year. Institutions describe this as a relatively certain mean reversion following two years of valuation mismatch.

The CSI All Share Securities Companies Index has a base date of June 29, 2007, and was launched on July 15, 2013. Its annual performance from 2021 to 2025 was -4.95%, -27.37%, 3.04%, 27.26%, and 2.54% respectively. The index's constituent stocks are adjusted according to its compilation rules, and its past performance does not indicate its future returns.

It is worth noting that entering the second half of the year, signs of market style rebalancing have become clearer, further enhancing the attractiveness of allocating to the brokerage sector. Guotai Haitong Securities indicates that historically during bull markets, brokerages typically experience two waves of rallies. The first is driven by better-than-expected liquidity, and the second is driven by earnings realization and style rebalancing. The current market is in a style rebalancing phase, and brokerages, as a sector with certain earnings growth and low valuations, are poised to take over as a leading sector in the second wave.

High growth prospects coupled with low valuations warrant attention to the brokerage sector's recovery potential. The Securities ETF (512000) and its feeder funds (Class A 006098, Class C 007531) passively track the CSI All Share Securities Companies Index, providing a one-stop investment in 49 listed brokerages. It is an efficient tool for concentrated exposure to leading brokerages while also covering mid- and small-sized firms. The latest fund size of Securities ETF (512000) exceeds 40 billion yuan, with an average daily turnover of over 1.2 billion yuan year-to-date, making it a top-tier brokerage ETF in terms of size and liquidity in the A-share market.

Note: Recent market volatility may be significant. Short-term gains or losses are not indicative of future performance. Investors must invest rationally based on their own financial situation and risk tolerance, paying close attention to position sizing and risk management.

Data source: Shanghai and Shenzhen Stock Exchanges, etc.

Institutional view source: Guotai Haitong report dated June 17, 2026, titled "When Will the Brokerage Sector Turn Around?"

ETF fee-related notes: When subscribing for or redeeming fund shares, subscription/redemption agents may charge a commission not exceeding 0.5%. On-exchange trading fees are subject to the actual charges by securities firms, and no sales service fee is charged. Feeder fund fee-related notes: For the Huabao CSI All Share Securities Companies ETF Feeder Fund (Class A), the subscription fee (front-end load) is 1,000 yuan per transaction for subscription amounts of 2 million yuan or more, 0.6% for amounts between 1 million yuan (inclusive) and 2 million yuan, and 1% for amounts below 1 million yuan. The redemption fee is 1.5% for holding periods under 7 days, 0.5% for 7 days (inclusive) to 180 days, 0.25% for 180 days (inclusive) to 1 year, and 0% for 1 year (inclusive) or more. No sales service fee is charged. The Huabao CSI All Share Securities Companies ETF Feeder Fund (Class C) does not charge a subscription fee. The redemption fee is 1.5% for holding periods under 7 days and 0% for 7 days (inclusive) or more. The sales service fee is 0.4%.

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