[Citi: Chinese brokerage sector has reached an inflection point and CICC H shares are the first choice] On August 31, Citigroup said that the Chinese brokerage sector performed strongly in the second quarter and the return on equity (ROE) continued to improve. Supported by multiple positive factors such as capital control, stabilization of fee rates and a rebound in trading volume, the sector has reached an inflection point. Analysts Judy Zhang and others said in the report that the Chinese securities firms covered by the bank achieved strong operating income/net profit after tax growth in the second quarter, and all business sectors showed good growth momentum. Proprietary business remains the core revenue driver, accounting for 52% of total revenue, mainly benefiting from the excellent performance of China's stock market and the good performance of the bond market in the second quarter. It is expected that the ROE of the covered brokers will reach about 11% in 2026, supporting its forecast price-to-book ratio in 2026 to exceed 1 times, and meaning that the covered H-share brokers have an average of about 36% room for stock price growth. Supported by mega-IPOs, the strong momentum in equity financing is expected to continue into the third quarter of 2026. CICC H shares are the first choice because the valuation is very attractive; the strong third-quarter forecast performance is expected to be a short-term positive catalyst.