A-share market turnover hit a record high in the first half of 2026, while the bond market maintained a slow bull trend with volatile strength. Based on industry parent-company data, the securities sector saw operating revenue rise 32% year-on-year and net profit climb 23% in H1, with listed brokers outperforming the broader industry.

During the same period, 44 A-share pure-securities brokers collectively generated operating revenue of RMB 375.215 billion, up 44.39% year-on-year, and attributable net profit of RMB 163.434 billion, a 48.86% increase. Among these 44 brokers, CITIC Securities posted the highest revenue and net profit in H1 2026, while Pacific Securities recorded the lowest figures in both metrics. China Merchants Securities led all peers in revenue growth at 108.19%, while Hongta Securities suffered the steepest revenue decline of 14%. Tianfeng Securities achieved the highest net profit growth at 549.03%, whereas Hongta Securities saw the largest net profit drop of 23.93%. Only Great Wall Securities and Hongta Securities reported negative revenue growth, and only Hongta Securities and Hualin Securities recorded negative net profit growth.

China Merchants Securities Records Largest Net Capital Reduction in H1

From a liquidity and risk-control perspective, Guotai Haitong held the highest net capital (parent-company basis, same below) at RMB 225.987 billion by end-June, while Hualin Securities had the lowest at just RMB 5.702 billion. In terms of absolute change, Guotai Haitong saw the largest increase from end-2025, adding RMB 40.9 billion, whereas China Merchants Securities posted the biggest decrease, falling RMB 2.461 billion. On a percentage basis, Guotai Haitong recorded the largest gain of 22.10%, while Northeast Securities experienced the steepest drop of -6.96%.

Notably, China Merchants Securities warrants close attention because it achieved the highest revenue growth and the largest year-on-year increase in proprietary trading income (calculated as investment gains plus changes in fair value gains minus investment income from associates and joint ventures) among listed brokers in H1, yet its net capital shrank by the largest margin among 43 listed brokers (excluding East Money data).

With significantly improved market activity in H1 2026, the brokerage industry entered a performance boom. China Merchants Securities delivered a half-year report with both revenue and net profit doubling: operating revenue reached RMB 21.902 billion, up 108.19% year-on-year, and attributable net profit hit RMB 10.624 billion, a 104.87% increase. This revenue growth rate ranked highest among the 44 listed brokers.

Proprietary trading served as the primary growth engine. Calculated using the formula above, China Merchants Securities' proprietary trading income reached RMB 12.914 billion in H1, surging 213.19% year-on-year and accounting for 58.97% of total revenue—the highest growth rate among its 44 listed peers. According to the half-year report, the company's investment and trading segment generated operating revenue of RMB 10.891 billion, up 325.63% year-on-year.

However, China Merchants Securities' net capital declined by RMB 2.461 billion, the largest reduction among all 44 listed brokers, creating a divergence between high earnings growth and shrinking capital—a meaningful risk factor. Net capital dropped from RMB 89.550 billion at end-2025 to RMB 87.088 billion by end-June. Wind data shows that the combined net capital of the 44 listed brokers reached approximately RMB 1.88 trillion by end-June 2026, up 6.6% from end-2025, reflecting an overall expansion trend. Among major brokers, Guotai Haitong had net capital of RMB 225.987 billion, up 22.10%; CITIC Securities recorded RMB 181.039 billion, up 15.20%; and even Hualin Securities, the smallest at RMB 5.702 billion, achieved positive growth of 4.04%. Yet China Merchants Securities ranked last industry-wide with its RMB 2.461 billion reduction.

Multiple Risk Indicators Slide

As of end-June 2026, China Merchants Securities' parent-company risk-control metrics were as follows: risk coverage ratio at 227.55%, down 29.53 percentage points from 257.08% at end-2025; capital leverage ratio at 11.48%, down 0.43 percentage points from 11.91%; liquidity coverage ratio at 152.85%, down 6.31 percentage points from 159.16%; and net stable funding ratio at 171.49%, up 6.64 percentage points from 164.85%.

Regulatory alert thresholds are set at 120% for risk coverage, 8% for capital leverage, 120% for liquidity coverage, and 120% for net stable funding. China Merchants Securities currently exceeds all alert levels by a wide margin, with no breach of any threshold. However, the 29.53-percentage-point decline in risk coverage warrants attention. Total risk capital reserves rose from RMB 34.833 billion to RMB 38.273 billion, a 9.87% increase, while net capital simultaneously fell from RMB 89.550 billion to RMB 87.088 billion. The growth in risk capital reserves stems mainly from higher risk capital consumption driven by business expansion. Risk coverage measures net capital's ability to absorb risk capital reserves; with net capital declining while capital-intensive business scales up, the denominator grows while the numerator shrinks, meaning the buffer is being consumed at an accelerated pace.

Additionally, China Merchants Securities' capital leverage ratio of 11.48% at end-June ranked in the bottom fifth among 43 listed brokers, significantly below the average of 22.05%. These figures indicate that the company's high revenue and proprietary trading growth have partially come at the cost of accelerated net capital depletion. Furthermore, the declines in risk coverage, liquidity coverage, and capital leverage, along with the largest industry-wide net capital reduction, are compressing the company's risk buffer. If market conditions shift or proprietary trading suffers significant drawdowns, risk indicators could deteriorate rapidly, potentially forcing the company to replenish net capital through equity offerings, subordinated debt issuance, or retained earnings.

Can High Investment Income Growth Persist?

In H1 2026, China Merchants Securities' proprietary investment income accounted for roughly half of total revenue, with net investment gains of RMB 7.167 billion representing 32.72% of total revenue. Several institutions believe a significant portion of the company's income derives from fair value changes in STAR Market and ChiNext follow-on investment projects.

According to a research report by Soochow Securities titled "China Merchants Securities (600999) 2026 Interim Report Review: Benefiting from Sci-Tech Investment, H1 Attributable Net Profit Doubles Year-on-Year", sci-tech investment was the primary driver of the company's Q2 performance, with expectations of continued contributions going forward. The sharp rise in H1 2026 performance is mainly attributable to the surge in STAR Market and ChiNext IPOs, as the company's "three-investment linkage" strategy entered a harvest phase. Projects such as Dapu Micro (estimated by Soochow Securities to contribute over RMB 2 billion in profit) and Zhipu, upon listing, generated substantial unrealized gains. H1 2026 investment income (including fair value changes) reached RMB 12.91 billion, up 213% year-on-year. Changxin Technology and Yushu Technology have already IPO'd in Q3, and Soochow Securities expects continued high returns.

Meanwhile, a research report by Huachuang Securities titled "China Merchants Securities (600999) 2026 Half-Year Report Review: Trading Recovery and Sci-Tech Harvest Form Dual Engines, H1 Net Profit Doubles" highlighted that the company's wholly-owned alternative investment subsidiary, Zhaosheng Investment, has deeply positioned itself in three hard-tech sectors—digital intelligence technology, green technology, and life technology—with key projects accelerating their entry into the secondary market. Benefiting from Dapu Micro's successful listing on the ChiNext Board in April, as well as Changxin Technology's filing and subsequent listing on the STAR Market in July, the company saw substantial growth in equity investment fair value and exit gains. Zhaosheng Investment generated net profit of RMB 5.22 billion in H1 2026, a year-on-year surge of 8,370%.

This RMB 5.22 billion net profit accounts for nearly half of China Merchants Securities' total H1 net profit. In other words, without Zhaosheng Investment, the company's first-half profit would have been roughly halved. However, the sustainability of the alternative investment subsidiary's high profit growth remains uncertain. Some argue that such returns are inherently low-frequency in nature, and their persistence depends on whether high-yield projects like Changxin Technology continue to emerge. Should capital markets undergo significant corrections or IPO pacing slow, Zhaosheng Investment's profits would face considerable pressure. In fact, Soochow Securities' forecasts have already set China Merchants Securities' 2027 attributable net profit expectation at an 18% year-on-year decline, reflecting market concerns.