Event overview
On February 27, the United States, the European Union, the United Kingdom and Canada issued a joint statement on sanctions against Russia: remove the selected Russian banks from the swift system; It promised to impose sanctions on the foreign exchange reserves of the Russian central bank.
Core view:
In the short term, it has a great impact on the Russian financial system, and CIPS may become the first choice for Russia to replace the payment system
Swift is the safest, most convenient and most important cross-border payment system in the world. Almost all important financial institutions all over the world are members of the system. At present, swift system has about 11000 members of financial institutions, including nearly 300 Russian banks, and handles more than 80% of Russia’s international settlement. Excluding some Russian banks from the swift system makes these banks unable to trade in financing and bonds such as US dollars, euros and Japanese yen. In the future, with the escalation of sanctions, it may also involve energy transactions such as Russian natural gas and oil, which is bound to have a huge impact on the Russian financial system.
The huge impact on the financial system in the short term will prompt Russia to find an alternative payment system. CIPS payment system or priority scheme:
1. The SPFS payment system dominated by Russia is used, but the transaction volume of SPFS trading system accounts for only 20% of the transaction volume in Russia, and there is still a lot of gap with swift in terms of the number of users, frequency of use and internationalization.
2. Use the CIPS payment system dominated by China. CIPS system is ahead of SPFS system in terms of internationalization and transaction volume, or it will be the first choice of Russian payment system.
CIPS has developed rapidly in recent years. Sanctions against Russia will catalyze the development of CIPS
Cross border interbank payment system (CIPS) is an independent payment system organized and developed by the people’s Bank of China, which provides capital clearing and settlement services for domestic and foreign financial institutions. In recent years, with the acceleration of RMB internationalization, CIPS has also ushered in rapid development. In January 2022, the international payment share of RMB rose to 3.20% from 2.70% in December last year, a record high. The global ranking of RMB international payment also ranks fourth in the world, following the US dollar, euro and sterling. In 2021, the number of CIPS transactions reached more than 3.3 million, an increase of more than 50% over 2020, and the transaction amount was about 80 trillion yuan, an increase of more than 75% over 2020.
At present, the CIPS system has 1259 participants, covering 103 countries and regions. The proportion of overseas participants is rising rapidly, reaching 649, accounting for 52% of the system.
We believe that based on the characteristics of CIPS, such as high internationalization level, wide coverage of customers and large transaction amount, the financial sanctions encountered by Russia may lead to the diversion of some settlement businesses to CIPS, and the sanctions against Russia will make other non European and American countries re-examine the financial security issues and force more countries to join the CIPS system. It is conducive to the development of financial technology, especially the digital RMB industrial chain.
The acceleration of localization substitution process is first conducive to financial innovation
Sanctions against Russia will accelerate the development of China’s information and innovation field and benefit financial information and innovation. 2022 will be a great year for financial innovation. China’s financial industry mostly uses foreign products or open source software from office system to core business system. With the expansion of credit innovation pilot and the deepening of system substitution, the penetration rate of financial credit innovation will increase significantly. We believe that financial innovation is expected to be fully promoted and accelerated in the financial industry in 22 years. We expect the overall investment scale of industrial innovation to exceed 10 billion. At the request of the financial information and innovation Working Committee, the bank will probably replace the whole industry this year. From 198 head financial enterprises included in the pilot of financial information and innovation in 21 years to the promotion of the whole industry, once it is fully replaced, the volume can be expected. We believe that the sanctions against Russia will accelerate the replacement speed of financial and other credit innovation industries, which will first benefit financial credit innovation.
Investment advice
1) from the perspective of ecological operation: Bank IT manufacturers usher in system transformation and scenario operation opportunities. Commercial banks have become an important subject of DCEP issuance (exchange), and bank IT manufacturers have ushered in system transformation and scenario operation opportunities. Combined with the current scenario expansion process of the central bank, we believe that we should focus on the head bank IT manufacturers at this stage, with both the certainty of bank side it transformation and the imagination space of scenario operation. Focus on recommending Yusys Technologies Co.Ltd(300674) , Shenzhen Sunline Tech Co.Ltd(300348) , Digital China Information Service Company Ltd(000555) , and other beneficiary manufacturers include Global Infotech Co.Ltd(300465) , Tansun Technology Co.Ltd(300872) , Northking Information Technology Co.Ltd(002987) , etc.
2) from the perspective of hardware Wallet: financial equipment manufacturers will also usher in large-scale transformation opportunities. The downstream hard wallet is an important part of the circulation link. As the main payment terminals, smart POS and ATM will take the lead in releasing the transformation demand. This foreign card, visual card, bracelet and other hard wallet carriers also have transformation expectations. The beneficiary objects include Chutian Dragon Co.Ltd(003040) , Urovo Technology Co.Ltd(300531) , Newland Digital Technology Co.Ltd(000997) , Xgd Inc(300130) , Lakala Payment Co.Ltd(300773) , Grg Banking Equipment Co.Ltd(002152) , etc.
3) from the perspective of Xinchuang: domestic WPS leading manufacturer Beijing Kingsoft Office Software Inc(688111) , domestic middleware leading Beijing Tongtech Co.Ltd(300379) , domestic PDF leading Fujian Foxit Software Development Joint Stock Co.Ltd(688095) , domestic server leading Dawning Information Industry Co.Ltd(603019) .
Risk tips
Industry competition intensifies; The implementation of financial science and technology innovation policies was less than expected.
