Zhou viewpoint:
Market making system is a powerful supplement to competitive trading, which can improve market liquidity, promote price discovery and stabilize the market. On January 7, the CSRC issued the pilot provisions on stock market making trading business of securities companies on the science and Innovation Board (Draft for comments), which plans to officially introduce the market making system into the science and innovation board. At present, the liquidity of the science and innovation board is stratified. In 2020, the average daily turnover rate of 37% of individual stocks is less than 3%. The reduction of pricing and transaction efficiency may not be conducive to the long-term healthy development of the science and innovation board and weaken the financing support for the development and growth of science and innovation enterprises. The pilot threshold is high. The securities sources include self-supporting and borrowing from securities companies. The market making shareholding shall not exceed 5%. The main contents of the exposure draft include: 1) in terms of access, the pilot securities companies need to be approved by the CSRC to meet the requirements of continuous net capital of no less than 10 billion yuan in the last 12 months and classified rating of class A or above in the last three years. It is expected that about 20-25 qualified securities companies will meet the requirements; 2) In terms of securities sources, securities companies can use their own stocks, borrow from securities companies or other stocks that have the right to dispose of; 3) In terms of risk control, it is necessary to incorporate market making transactions into the comprehensive risk management system, fill in risk control indicators with reference to self operated positions, and the market making shareholding shall not exceed 5%.
Long term market business will not only bring business increment, but also improve performance robustness. In the short term, the market making system, as a supplement to competitive trading, has yet to be gradually implemented, and its contribution to the industry’s income is expected to be limited in the short term. From the perspective of development, market makers take bid ask spread as the main source of income, and the improvement of business proportion will improve the robustness of securities business performance. We believe that the head securities companies have the advantages of capital strength, risk control ability and technical system, and the concentration of institutional business may be further improved. In the follow-up, we can pay attention to the implementation of the market making mode of single / multiple securities companies and whether there are policies related to transaction fees.
Focus on recommending individual stocks: firmly optimistic about the core main line of equity and institutionalization. There is significant room for valuation premium of advantageous securities companies in wealth management + large asset management + institutional business (derivatives, securities lending and capitalized investment banking). We firmly recommend Gf Securities Co.Ltd(000776) , Huatai Securities Co.Ltd(601688) , and suggest paying attention to China International Capital Corporation Limited(601995) H.
Core data tracking:
1) brokerage business: the average share based turnover this Sunday was RMB 1318.9 billion, a month on month increase of + 19.4% and a year-on-year increase of + 4.0%.
2) margin trading: as of January 6 (the data on January 7 were not disclosed), the balance of two cities and two financing was 1.83 trillion yuan, a year-on-year increase of + 10.1%; The balance of two financing accounts for 2.46% of the circulating market value.
3) investment banking: as of January 7, the IPO and refinancing underwriting scale of this year were RMB 61.7 billion and RMB 5.6 billion respectively; The underwriting scale of corporate bonds, corporate bonds and ABS was 20.3 billion yuan, 1.7 billion yuan and 2 billion yuan respectively.
4) public funds: the average estimated application redemption ratio of funds this week is 1.84, and the overall fund market is expected to be a net inflow of funds. The scale of the newly established equity fund was 6.6 billion yuan, a month on month increase of – 70.5%.
5) OTC derivatives: new open source securities and Donghai securities are OTC option dealers, and the list of dealers is expanded to 45, including 8 primary dealers and 27 secondary dealers.
Risk tip: the reform is not advancing as expected; Large fluctuations in the capital market; The transfer of residents’ asset allocation was less than expected.
