Summary in Plain Language
This financial report discusses the most counterintuitive phenomenon in the A-share market this year: the securities sector, often referred to as the "bull market leader," achieved its best results in over five years in the first half of 2026. The entire industry earned more than 170 billion yuan, with profits increasing by nearly 50% year-on-year. Almost all listed securities companies were making money, and the top firms even doubled their profits. However, paradoxically, the stock prices of these securities companies fell. By early September, the sector as a whole had dropped by nearly 12%, while the broader market only fell by 0.44%. In other words, investing in the market as a whole resulted in almost no loss, but investing in securities companies resulted in an average loss of 12%. The valuation of the sector is even lower than it was in 2022, when the industry was performing poorly and many companies were losing money. The core of this report is to analyze the underlying reasons for this contradiction—how profits soared while stock prices plummeted—and to assess whether the sector's performance can continue.
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Detailed Explanation
1. Understanding the Outstanding Performance of Securities Companies This Year
Many people don't fully realize the impressive performance of securities companies. To put it in more relatable terms, imagine a securities office that has been operating in your neighborhood for over a decade, with lukewarm business in the past few years, and was on the brink of closing down in 2022. But in 2023-2024, it started to recover, and in 2026, it made a huge profit.
The revenue and profits of all 44 listed securities companies increased. Nine of the top ten firms had profit growth rates of over 20%, with leading companies like China Merchants Securities even doubling their revenue and profits. The logic behind this profit growth is straightforward: the total trading volume in the market exceeded 300 trillion yuan in the first half of the year, with an average of 2.7 trillion yuan traded daily, nearly double the amount from the same period last year. The number of new investors also increased by 60%. Just from the commissions collected from these transactions, securities companies earned nearly 100 billion yuan. Additionally, the companies invested their own capital in stocks and bonds, pushing their profits to their highest level in five years. According to past trends, the "bull market leader" sector should have seen significant price increases during such a hot market, but this year, the opposite happened.
2. The Most Absurd Contrast: The More Profit, the More Severe Losses
The current performance of securities company stocks is quite surprising. The market index rose by 3% in the first half of the year, but the securities sector fell by nearly 8%. By early September, the market index had almost returned to its starting point, while the securities sector had lost 11.69%.
The valuation of the sector is even more alarming: the overall price-to-book ratio is only 1.26, meaning that if all the sector's offices, licenses, and cash assets were sold, their total value would be 1 yuan, but the market is only valuing them at 1.26 yuan. This price is lower than it was in 2022, when the industry was struggling and many companies were losing money, indicating that the market does not expect the sector to continue to generate high profits in the future.
3. The First Reason Why Investors Are Unimpressed: Most Profits Come from Stock Trading
The main reason investors are skeptical about high valuations of securities companies is that much of their profit comes from risky stock trading. Approximately 43% of their revenue comes from "proprietary trading"—where the companies use their own capital to trade stocks and bonds. This revenue is highly dependent on market conditions; when the stock market is up, they profit significantly, but when it's down, they lose a lot. In the past, this has led to sudden losses. Although top firms are now diversifying into more stable businesses such as derivatives trading and market-making services, most of their profits are still linked to market fluctuations.
4. The Second Reason: The Securities Sector No Longer Holds the Same Appeal
In the past, when the A-share market was rising, investors would naturally turn to securities companies because they were the most directly benefited by the market trends. However, this has changed in 2025. Now, there are other sectors with strong growth potential, such as AI, semiconductors, and robotics, which have more substantial industrial support and faster profit growth. Institutions have more funds to invest, and they prefer these sectors over securities companies. This is evident in the portfolio data of active funds, where the securities sector accounts for only 0.63% of their holdings.
5. Predicting Future Trends
While the performance of securities companies is not expected to collapse immediately, their reliance on market fluctuations has exposed a weakness. Although the current trading volume and commission income remain stable, the sector's profits are still highly dependent on the stock market. If the market continues to decline, the profits from proprietary trading could shrink rapidly. Only those firms that have diversified their revenue sources and rely on professional services rather than market speculation are likely to experience sustained growth.