Guotai Haitong: Continued entry of medium- and long-term funds into the market is expected; recommends overweighting brokerages.

Guotai Haitong released a research report stating that the revisions focus on three major directions: supporting the development of equity funds, regulating investment operations, and improving operational flexibility. With the high-quality development of the public fund industry advancing, the continued entry of medium- and long-term funds into the market is expected. The firm is bullish on the migration of household deposits to public funds and other asset management products under the low interest rate environment, with brokerages continuing to benefit as intermediaries for equity assets. It recommends overweighting brokerages. Event: On October 9, the CSRC publicly solicited opinions on the "Measures for the Administration of the Operation of Publicly Offered Securities Investment Funds (Draft for Comment)" (hereinafter referred to as the "Operation Measures") and supporting rules. Guotai Haitong's main views are as follows: Adapt to the high-quality development orientation of public funds and improve supporting rules. The "Operation Measures" is an important supporting departmental regulation of the "Securities Investment Fund Law," clarifying investment operation matters such as product registration, subscription and redemption, investment restrictions, income distribution, and holders' meetings. In 2025, the "Action Plan for Promoting the High-Quality Development of Public Funds" was issued, focusing on "steadily advancing public fund reform, promoting the high-quality development of securities and fund institutions, and supporting the entry of medium- and long-term funds into the market," driving the public fund industry to transition from emphasizing scale to emphasizing investor returns. The current "Operation Measures" has been more than 10 years since its revision and release in 2014. Against this backdrop, the rules are being revised and improved. The revisions focus on three major directions: supporting the development of equity funds, regulating investment operations, and improving operational flexibility. 1) Supporting the development of equity funds: First, lower the establishment threshold for equity funds, reducing the establishment threshold for equity and hybrid funds, FOF funds, etc., from a scale of 200 million yuan and 200 million shares to 50 million yuan and 50 million shares, respectively. Second, allow FOFs to invest in ETF feeder funds, and raise the upper limit of the proportion of non-FOF funds investing in other funds from 10% to 30%. Third, optimize regulatory requirements for index funds. Fourth, broaden space for product innovation, such as adding "closed-end funds with no fixed term" and improving the definitions of equity funds and bond funds. 2) Regulating investment operations: Such as strengthening the management of investment style stability, reinforcing the constraints of performance benchmarks, and strengthening counter-cyclical layout management of fund products. 3) Improving operational flexibility: Such as improving regulatory requirements for "mini funds," optimizing exit requirements for sponsored funds, and improving the governance efficiency of holders' meetings. With the high-quality development of the public fund industry advancing, the continued entry of medium- and long-term funds into the market is expected. The "Operation Measures" further implements the action plan for the high-quality development of public funds. The firm believes that the reform measures are expected to achieve deep alignment of the interests of fund managers and investors, help enhance investors' trust in public funds, and promote industry expansion and the continued entry of medium- and long-term institutional funds into the market. Risk warnings: Significant volatility in the equity market; household funds entering the market less than expected.