'Flagships' emerging – read~through from Japan's lost decades

Investment Rating - The report provides a positive outlook for the China securities sector, particularly in Wealth Management (WM) and Asset Management (AM) businesses, forecasting significant growth rates [4][12]. Core Insights - The China brokerage sector's WM revenue is expected to grow at a compound annual growth rate (CAGR) of 26% from 2023 to 2030, driven by a shift in household asset allocation from non-financial to financial assets [5][4]. - The AM revenue for the China brokerage sector is projected to grow at a CAGR of 22% during the same period, reaching 11% of total revenue by 2030 [12][11]. - The report highlights that financial assets currently account for only 20% of China's total household assets, compared to 44% in Japan during the 1990s, indicating substantial room for growth in financial asset allocation [5][8]. - The introduction of China's buy-side investment advisory pilot in 2019 and subsequent industry-wide rollout in 2023 is expected to enhance the WM capabilities of brokerages [8][9]. - The competitive landscape is evolving, with full-service brokerage channels gaining market share as demand for professional investment advisory services increases [8][9]. Summary by Sections Wealth Management (WM) Business - The report forecasts a 26% CAGR for the China brokerage sector's WM revenue from 2023 to 2030, driven by a reallocation of household assets towards financial products [4][5]. - The current mix of financial assets in household assets in China is significantly lower than in Japan during its economic peak, suggesting potential for growth [5][8]. Asset Management (AM) Business - The AM revenue is expected to grow at a 22% CAGR from 2023 to 2030, with a positive correlation between fund scale and stock market development [12][11]. - The diversification of mutual fund sales channels in China is more advanced than in Japan during the 1990s, which is seen as a key factor for the growth of the AM industry [15][12]. Market Dynamics - China's household wealth has experienced a rapid 16% CAGR from 2000 to 2019, indicating a growing base for financial products [9][12]. - The report notes that as of June 30, 2024, the total AUM of China's mutual funds reached RMB 29.1 trillion, with a year-on-year increase of 9.8% [20][21].