Summary of this issue:
Core view: the social finance data in January greatly exceeded expectations and maintained strong recommendation for the securities sector. First of all, monetary easing brought by economic stimulus and then transmitted to credit easing, so as to achieve economic improvement is the decisive factor of the securities market. From the historical market review, in addition to the bull market brought about by the split share structure reform in November 2006, there have been several times of securities market: RMB 4 trillion at the end of 2008, correcting the “money shortage” by “three-phase superposition” in the second half of 2014, comprehensively reducing interest rates and reserve requirements, credit expansion of financing difficulties of small and medium-sized enterprises at the end of 2018, and “rumors of mixed banking and securities industry” after social finance exceeded expectations in April 2020, They are all the products of economic stimulus. At the same time, we should also compare and distinguish. Compared with the “flood irrigation” before 2018, the “precision drip irrigation” has become the mainstream in the past two years. If we consider the relevant loosening of real estate policies, we prefer to compare the current time point to the stable growth in the early stage of the epidemic in 2020 and the overall loose liquidity in 2014. But the bond firm’s situation is imminent! Secondly, in terms of target selection, whether traditional securities companies or internet securities companies, flag stocks CITIC and Dongcai are suppressed by allotment and convertible bonds respectively. They are at the low point of individual stocks and face the lifting of repression, which has the power to lead the rebound of the whole sector. In recent exchanges with the market, people wavered in the logic of wealth management, believing that the market affected the issuance of funds, thus breaking the logic of wealth management of securities companies. However, we believe that there are two main lines of wealth management. First, as a shadow stock of public funds, there is still a lot of room for holding securities companies if compared with the increase of many mutual funds in the United States in the 1980s; Second, on the channel side, the cold issuance of short-term popular track funds can not stop the flood of funds entering the market. At the same time, under the comprehensive registration system, investment banks will also contribute considerable performance. It is suggested that investors seize the few remaining left window period to lay out the brokerage sector. The insurance sector rebounded this week, and we believe it is still expected to continue to repair the valuation with the “epidemic repair” sector. The main logic of the rise is that the agent activity rate is increased and the interest rate is expected to rise in the short term. There is still pressure on the liability side in the long term and can not be falsified in the short term. Investors can pay attention to it in the short term.
Suggestions: CITIC, Dongcai, Guangfa, Dongfang, great wall, Zheshang, Taibao, Xinhua, etc.
Market review: the main indexes rose and fell this week, and the Shanghai composite index reported 3462.95 points, + 3.02%; Shenzhen stock index reported 13224.38 points, -0.78%; The CSI 300 index reported 4601.40, + 0.82%; Gem 2746.38, -5.59%; The China Securities composite bond (net price) index was reported at 100.20, – 22bp. The average daily turnover of A-Shares in Shanghai and Shenzhen was 912.316 billion yuan, a month on month increase of + 7.66%, and the average daily turnover rate was 1.28%, a month on month increase of + 14.93bp; The balance of two financial institutions was 172.352 billion yuan, down from – 4.14% last week. As of February 11, 2022, the scale of equity + hybrid funds was 8.64 trillion yuan, a month on month increase of + 0.08%. This week, the scale of newly issued equity funds was 1.469 billion yuan, a month on month increase of – 77.45%. In terms of individual stocks, securities companies: Guolian Securities Co.Ltd(601456) + 7.86%, Chinalin Securities Co.Ltd(002945) + 7.30%, Sealand Securities Co.Ltd(000750) + 5.64%; Insurance: China Life Insurance Company Limited(601628) + 14.66%, Ping An Insurance (Group) Company Of China Ltd(601318) + 11.25%, China Pacific Insurance (Group) Co.Ltd(601601) + 9.79%; Diversified Finance: Luxin Venture Capital Group Co.Ltd(600783) + 14.11%, Kunwu Jiuding Investment Holdings Co.Ltd(600053) + 12.40%, Gi Technologies Group Co.Ltd(300309) + 9.62%.
View of the securities industry: on February 11, the CSRC issued the regulations on the supervision of interconnected depositary receipts business of domestic and foreign stock exchanges, making specific arrangements in expanding the scope of domestic and foreign exchanges participating in interconnected depositary receipts business, increasing CDR financing arrangements and continuous supervision. In terms of expanding the scope of the exchange, qualified listed companies of the Shenzhen Stock Exchange will be included in the domestic market, and the overseas market will be expanded to major markets such as Switzerland and Germany. The regulatory provisions allow overseas issuers to raise funds in China by issuing CDRs and adopt differentiated supervision on their financial information and internal control disclosure. If overseas issuers adopt equivalent accounting standards, they do not need to disclose the differences with Chinese accounting standards, but adopt other accounting standards and need to supplement the difference adjustment information applicable to Chinese accounting standards for business enterprises. In addition, detailed arrangements were made in terms of optimizing the disclosure content of the annual report and the applicable rules for major asset restructuring. The further optimization of the interconnection mechanism is conducive to the layout of A-Shares by overseas long-term investors, and the brokerage, credit, proprietary and other businesses of securities companies are expected to usher in performance increment.
In 2021, the performance grew steadily, the asset quality improved, and the valuation did not match the performance and asset quality. From the performance of 18 listed securities companies that have disclosed the performance express, more than 70% of the securities companies’ return to parent net profit increased by more than 20%, and half of them exceeded 30%. Among them, China stock market news, Founder Securities Co.Ltd(601901) , Orient Securities Company Limited(600958) , Central China Securities Co.Ltd(601375) net profit growth ranks first. China stock market news is expected to realize a net profit attributable to the parent company of 4.825 billion yuan in 2021, with a year-on-year increase of 66.90%, Founder Securities Co.Ltd(601901) , Orient Securities Company Limited(600958) , Central China Securities Co.Ltd(601375) net profit in 2021 is expected to achieve a year-on-year increase of 50% – 70%, 87% – 107% and 360% – 437% respectively; The net profit growth of Citic Securities Company Limited(600030) , Everbright Securities Company Limited(601788) exceeded 50%. In addition, the net profit of four securities companies, including Zheshang Securities Co.Ltd(601878) , Guotai Junan Securities Co.Ltd(601211) , exceeded 30%. In 2021, the performance of securities business grew steadily under the high base of 2020. It is expected that the net profit growth of most listed securities companies will exceed 30%, laying a solid foundation for the rise of the sector. The current valuation of securities companies is PB1 706 times, the valuation still does not match the performance and asset quality, which is 2.5 times away from PB2 There is still much room for 61x valuation center.
Under the background of the comprehensive registration system and the great development of wealth management, securities companies with excellent investment banking ability and prominent wealth management business are expected to obtain value revaluation opportunities. Head securities companies have advantages in talent reserve, research ability, asset pricing ability and sales ability, and the market share of registration system is concentrated to the head. The comprehensive registration system will bring performance increment to the head securities companies with stronger comprehensive strength. It is suggested to pay attention to: Citic Securities Company Limited(600030) , China International Capital Corporation Limited(601995) , China Securities Co.Ltd(601066) , Huatai Securities Co.Ltd(601688) , Haitong Securities Company Limited(600837) . In the context of the great development of wealth management, the wealth management line suggests paying attention to the core targets benefiting from the expansion of the wealth management market: 1 Obvious advantages in products and investment advisers China International Capital Corporation Limited(601995) to promote the large-scale development of high-end wealth management; 2. Benefiting from residents’ wealth entering the market through institutions, double excellence in products and investment advisory services + high proportion of asset management income + high contribution of participating / holding public funds Gf Securities Co.Ltd(000776) , Orient Securities Company Limited(600958) , China Industrial Securities Co.Ltd(601377) etc; 3. The company attaches great importance to its strategy and has obvious characteristics of private placement and consignment sales, which is expected to realize Zheshang Securities Co.Ltd(601878) overtaking in curves.
View of the insurance industry: on February 10, the CBRC issued the administrative measures for information disclosure of life insurance products (Draft for comments) and the rules for information disclosure of long-term life insurance products (Draft for comments) to each life insurance company. The new regulations show that life insurance companies need to disclose not only the product catalogue and terms on the official website, but also the rate table, cash value examples, product specifications, etc.
In addition, when demonstrating the policy benefits of dividend insurance, universal insurance and investment linked insurance, the insurance company shall disclose the rate table, and the interest rates of dividend and universal demonstration shall be reduced to two levels. Among them, the demonstration of dividend insurance benefits shall adopt two levels: guaranteed benefit demonstration and dividend benefit demonstration, and the realization rate of cash dividend (the ratio between actual dividend and demonstration dividend) shall be disclosed year by year; The benefit demonstration of universal insurance is reduced from the original three grades to two grades. The minimum guaranteed benefit demonstration and universal interest settlement benefit demonstration should be used to demonstrate the future benefit payment of the product, and the settlement interest rate should not exceed 4%; The demonstration of investment linked insurance benefits must be divided into three grades: optimistic, neutral and pessimistic. The corresponding hypothetical return on investment shall not be higher than 6%, 3.5% and – 1% respectively, and the actual investment return may be negative. This draft for comments more systematically and comprehensively regulates all kinds of information disclosure, covers all sales processes, avoids disputes in the sales of investment linked insurance, universal insurance and dividend insurance, and ensures the interests of policyholders. We believe that the rise of insurance stocks in the beginning of the year was mainly due to 1) driven by the stable growth policy, the interest rate inflection point brought by the increase of credit expectation, the relaxation of real estate funds and risk mitigation, and the marginal improvement in the investment side. 2) the valuation of insurance stocks was at a historical low, and the market style switching led to the oversold rebound of insurance stocks with low allocation in the early stage. Looking forward to this year: the inflection point at the debt end has not yet appeared. Due to the impact of high base, suspension of speculation due to serious diseases, decline in attention to a good start and loss of manpower in the same period last year, the value of new orders and new businesses still decreased significantly from January to February this year. After March, with the decline of the base, the premium growth rate or marginal recovery. However, considering that the number of agents has not yet reached the bottom and the capacity improvement is limited, new orders and NBV may continue to decline in 2022, and the debt end of the whole year has not yet ushered in an inflection point. In the future, as the scale of the team bottoms out and recovers after clearing up and the activity rate of agents stabilizes, the liability side may usher in marginal improvement. At present, the repair of insurance valuation still depends on the performance of the asset side. Due to the upward interest rate, the relaxation of real estate policy and the switching of equity market style to undervalued value and high dividend, it is good. Policy regulation focuses on stability, and the orientation of active fiscal policy and broad monetary policy is clear. It is expected to underpin economic growth. Wide credit superimposes the expectation of US interest rate hike, and the long-term interest rate may usher in an inflection point, driving the valuation repair of insurance stocks. With the growth rate of social finance and credit reaching a new high in January and steady growth driving the economy to continue to improve, the yield of 10-year Treasury bonds has rebounded slightly to 2.78% and may continue to rise in the future. In addition, the adverse impact of real estate investment on insurance companies has been fully reflected, and real estate financing is expected to continue to be relaxed this year, and the real estate risk is controllable. In terms of equity, insurance stocks tend to underestimate the value of individual stocks with high dividends, which is in line with the style of this year’s equity market and is expected to achieve better investment returns. The current insurance valuation is still at an all-time low. The current share prices of Guoshou, Ping An, Taibao and Xinhua 2022epev are 0.66X, 0.62x, 0.50x and 0.44x respectively. It is suggested to pay attention to AIA led by high-quality agents and Ping An Insurance (Group) Company Of China Ltd(601318) and China Pacific Insurance (Group) Co.Ltd(601601) with more thorough life insurance reform.
Liquidity view: in terms of volume, the central bank made a net return of 800 billion yuan in the open market this week, including 100 billion yuan in reverse repurchase and 900 billion yuan in return. Next week, 300 billion yuan of reverse repurchase and 200 billion yuan of MLF will expire. In terms of price, the short-term capital interest rate fell this week. The weighted average inter-bank offered rate decreased by 45bp to 1.88%, and the inter-bank pledged repo rate decreased by 44bp to 1.87%. R001 down 34bp to 1.85%, R007 down 31bp to 2.01%, dr007 down 33bp to 1.98%. Shibor’s overnight interest rate fell 34bp to 1.81%. The issuing interest rate of interbank certificates of deposit decreased. The yield of one-year treasury bond decreased by 5bp to 1.92%, the yield of 10-year Treasury bond increased by 8bp to 2.79%, and the term spread expanded by 13bp to 0.87%. In terms of policy, steady growth continued to exert force, superimposed on the fourth quarter monetary policy implementation report, which continued the previous tone of monetary easing, followed by the focus on credit easing and the bottom of the long-term interest rate when the United States opened the tightening cycle.
Diversified financial perspective: focus on the trust and financial holding sectors that benefit from stimulating economic policies.
Risk factors: the deterioration of covid-19 epidemic, the decline of China’s economy beyond expectations, the decline of long-term interest rate beyond expectations, the success of the start is less than expected, the tightening of financial regulatory policies, the risk of spread loss caused by low interest rate, the pressure of agent shedding, lower than expected insurance sales, the uncertainty of the impact of capital market fluctuations on performance, etc.
