<div id="readability-page-1"><div>BOCOM International published a report stating that amid the steady recovery of China’s mainland economy, the fundamentals of the broad financial sector are set to further improve. In terms of earnings outlook, it expects the banking sector to accelerate its earnings recovery in 2026, with large state-owned banks maintaining positive net profit growth and joint-stock banks returning to positive net profit growth. The securities sector is expected to sustain relatively fast earnings growth, with leading institutions likely to achieve net profit growth of more than 15%. The insurance sector, affected by a high base in 2025 and a phased pullback in investment income, may see divergence in overall net profit performance, although some leading institutions are still expected to deliver positive growth.From a valuation perspective, the price-to-book ratios of banks, securities firms and insurers remain at historically low levels, offering a relatively high margin of safety.Looking ahead to 2H26, the firm believes the investment logic of high dividends plus valuation recovery in the broad financial sector will remain intact, with leading institutions demonstrating more balanced offensive and defensive allocation value.Banks, as the &#34;ballast stone&#34; of the financial sector, exhibit the most prominent defensive characteristics amid capital market volatility and can serve as core holdings for a &#34;seeking progress while maintaining stability&#34; strategy. Supported by improvements in the external environment and optimization of banks’ own operations, the sector’s fundamentals are showing a clear recovery trend. The downward cycle of NIM has largely ended. Coupled with solid asset quality and ample room for provision releases, profitability has begun to recover and operational resilience has further strengthened. The firm recommends paying attention to allocation opportunities in state-owned banks and CITIC BANK (00998.HK) +0.110 (+1.440%) Short selling $8.54M; Ratio 4.302% .Brokerages’ investment banking and wealth management businesses have shown a clear recovery trend and could deliver strong earnings elasticity as risk appetite further improves. Since 2026, stock performance differentiation has widened, with some leading names continuing to outperform peers on solid earnings support. Meanwhile, valuations of top-tier brokerages remain relatively low, leaving room for further upside re-rating. The firm recommends paying attention to CICC (03908.HK) -0.120 (-0.634%) Short selling $7.85M; Ratio 11.076% and CITIC SEC (06030.HK) -0.040 (-0.160%) Short selling $10.33M; Ratio 14.133% .The core insurance business remains broadly stable and can continue to serve as a supplementary allocation under the current investment logic. Hong Kong-listed insurers demonstrate strong resilience overall, particularly large life insurance leaders, which show greater operational stability and valuation appeal. The firm recommends paying attention to CHINA LIFE (02628 HK) and CHINA TAIPING (00966.HK) +0.590 (+2.984%) Short selling $14.85M; Ratio 12.429% . (ad/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-06-10 12:25.)</div></div>

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BOCOM International reports that China's financial sector fundamentals will improve in H2 2026, driven by economic recovery. Banks are expected to accelerate earnings growth with recovering NIMs and asset quality, while securities firms may see >15% profit growth for leaders. Insurance profits may diverge but top insurers remain stable. Valuations across banks, brokers, and insurers are historically low, offering safety. The firm recommends focusing on leading institutions like state-owned banks, CITIC Bank, CICC, CITIC Securities, China Life, and China Taiping for a high-dividend and valuation recovery strategy.

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BOCOM International: Financial Sector Fundamentals to Improve in 2H26, Favor Leading Institutions