基本面稳健，估值存在折让

China brokers despite strong earnings growth in 2025 and 1Q26 Analyst, China FinancialsThe Hongkong and Shanghai Banking Corporation Limitedallen.m.chen@hsbc.com.hk+85239417203GaryLam*,CFA sector as increasingly attractive The Hongkong and Shanghai Banking Corporation Limitedgary.lam@hsbc.com.hk+85229966926Daffy Ronald* Buy rating and RMB42.80 TP; update other TPs; prefer CICC-H AssociateBangalore average daily turnover rose 107% y-0-y as at 29 May;(2) Sector consolidation:Ongoing consolidation is shifting competition from price-led to service-led, supportingfee-rate stabilisation;(3)International expansion: Webelieve the trend of Chineseenterprises expanding overseas and pursing overseas listings is set to continue forsome time. Our covered brokers are leading key projects in the Hong Kong IPOconfidence until the market data proves otherwise (See Enhanced oversight aroundcross-border flows, May 29 2026): (4) Accelerated IPO pipeline: We expect brokerstobenefit from domestic IPO acceleration.Chinese regulators havetaken formal stepstoadvancetheIPO preparations forCXMT (ChangXin MemoryTechnologies)andYMTC(Yangtze MemoryTechnology Corp)on the STAR market; (5)Attractivevaluations: CICC H-shares trade 0.6 SD below historical average; CITIC-H andHuatai-H trade 0.5SD above and 1.3 SDbelow, respectively. not registered/qualified pursuant to FINRA regulations High profile enforcement action: CSRC is restricting unauthorised cross-borderbrokerages.Our scenario analysis indicates that if 50% of Futu and Tiger's mainlandclientassetsarere-investedvia Stock Connect,ourcoveredbrokers could seea0.02% uplift in their brokerage commission incomes (see Exhibit 8). Despite thelimited impactonbrokers'toplinegrowth,weexpectthenewrulestochannelinvestorstowardslicensedbrokers,supportingcustomerbaseexpansionandcreating opportunities to deepen client relationships and grow AUM. Upgrade CITicS-H To Buy from Hold, supported by its capacity to further increaseleverage, fundraising to expand higher-margin overseas operations,and the ability tomaintaina relatively stable ROE in a buoyant market environment (see CITICSecurities: Solid market-leading position, 31 March 2026).Cicc H-share remainsour preferred pick since: (1) The consolidation with Dongxing and Cinda Securitiesbroadens CicC's national footprint, enabling it to leverage its wealth managementcapabilities toaccelerate retailbusiness growth;(2)weexpectoverseasbusiness tobecome the main driver of brokers' earning growth in the long term, as overseasROE is materially higherthandomestic returns (for CICC, 16% overseas ROE versus9.4% group ROE in 2025). CICC has the highest overseas exposure among peers,with overseas revenue contributing c30% in 2025, and is well positioned to expandfurther, supported by its strong reputation and high-quality franchise. HSBCFundingtheFutureSurvey Sentiment, Al and Private Credit Click to view Issuer of report: The Hongkong and ShanghaiBanking Corporation Limited Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Investment Research at:https://www.research.hsbc.com for CICC-H) underperformedrelevant indexes y-t-d despitesolid fundamentals. Investorssustainability of earnings andROE Historical data indicates thatROE has been volatile, whichisthekeyfactorlimitinghighervaluationsacrossthebrokersector Proprietary trading revenue isa major contributor to totalrevenue, but it remains difficulttoforecastduetoitshighsensitivitytoequitymarketperformance haverisensteadilysince2024and have increasedfurtheralongside stronger equitymarketperformance,supporting growth in brokers'interestincome. sectorcontinues,whichshould ease competitivepressures and supporthigherfee rates over the long term Brokers benefited from therapid growth in Hong Kong IPOactivity.Ourcoveredbrokersremained among the top threeby total funds raised in theHong Kong IPOmarket. Exhibit 8:Scenario analysis:Mainland China client assetsfromFutu and Tigercouldincomeforour covered brokersby0.02% Despite limited impactonbrokers'top line growth, weexpectnewrulestochannelbrokers, supporting customerbase expansion and creatingopportunitiestodeepenclientrelationships and grow AUM(asset under management) Total brokerage commission incomes of our three covered brokers in 2025 (RMBm)Total market share of brokerage commission incomes of our three covered brokers in 202518.3%Assuming 50% of Futu and Tiger's mainland client assets re-invested through Stock ConnectMainland client assets will be re-invested through Stock Connect (RMBm)90,000(3)Brokerage commission rate0.03%(4)Incremental brokerage commission incomes from Futu and Tiger's clients (RMBm)27(5) = (3) * (4)o/wCITICS,CICC andHuatai combined4.95(6) = (5) * (2)Impactonbrokeragecommission income-CITIcS,CIcC and Huatai combined0.02%(7) = (6) / (1)Source: Company data, HSBC estimates We in