Sinolink: The regulatory authorities have released the benefits of the interconnection policies between the two regions, maintaining a "Buy" rating for the securities industry.

Sinolink released a research report stating that on August 3, CSRC Chairman Wu Qing launched the listing ceremony for renminbi-denominated government bond futures in Hong Kong and delivered a speech, proposing five measures to deepen the pragmatic cooperation between the capital markets of the two places. The regulatory framework continuously releases policy dividends for connectivity, which will enhance the vibrancy of the capital markets, enrich the range of products, and elevate the global allocation value of Chinese assets. HKEX (00388) and high-quality brokerage firms that provide cross-border financing and investment services are expected to benefit in the long run. Currently, the PB and PE valuations for the securities sector are at 1.2x/16x, with several brokerages announcing mid-term performance upgrades and maintaining a "buy" rating for the undervalued securities industry with high performance growth. Sinolink's main points are as follows: Continue to support two-way financing; the structure of Hong Kong stocks continues to optimize. Since 2024, over 270 mainland enterprises have completed filings for listing in Hong Kong, raising more than 650 billion Hong Kong dollars. The market capitalization and trading volume of mainland companies listed in Hong Kong now account for 80% and 90%, respectively. Notably, several leading enterprises in the fields of new energy, new consumption, biomedicine, and artificial intelligence have listed in Hong Kong, indicating a continued optimization of the industry structure in the Hong Kong stock market. Next, the CSRC will continue to support mainland companies in listing in Hong Kong and high-quality Hong Kong companies in listing domestically, while also supporting eligible Hong Kong enterprises in issuing bonds in the mainland. The two-way connectivity for corporate cross-border financing is being facilitated, with the quality supply of Hong Kong stocks continuing to expand. Further expansion of connectivity products. Currently, international investors hold Chinese bond assets totaling 3.2 trillion yuan. The introduction of 5-year renminbi-denominated government bond futures in Hong Kong provides foreign investors with a convenient and efficient tool for interest rate risk management. The dual stock market coverage under the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs has exceeded 90%, and efforts are underway to expedite the inclusion of renminbi stock trading counters and REITs into the Stock Connect. The CSRC will also support increased cooperation among index companies in both regions to launch more indices based on Chinese assets, encourage regional institutions to introduce more ETF products based on the two markets and aligned with China's modern industrial system, and support Hong Kong in launching more futures varieties settled in renminbi. The diversification of product structures and the ongoing deepening of connectivity are expected to enhance the vibrancy of the capital markets in both regions. The "Five Major Synergies" framework is established, and cooperation pathways are clear. In addition to the functional synergy of two-way financing and the collaboration in launching diverse products, the CSRC will also focus on ecological synergy, regulatory synergy, and governance synergy, supporting high-quality securities and fund companies to operate and develop in Hong Kong, and enhancing regulatory cooperation between the two regions. The "Five Major Synergies" have formed a systematic blueprint for cooperation, promoting the high-quality development of the capital markets in both regions through systematic collaboration. Risk Warning Macroeconomic slowdown; significant decline in equity market activity; policy implementation progress and effects not meeting expectations.