Peace view-
How to interpret the cross year market of bank stocks in history? We looked back on the market performance of the sector in each month since 2010 and integrated the absolute and relative returns of bank stocks. We found that: 1) from the perspective of absolute returns, bank stocks recorded positive returns at the end of the year in 8 of the past 11 years; 2) From the perspective of relative returns, except for 2013, 2014 and 2019, the relevant indexes of the banking sector outperformed CSI 300 at the end of the year, and the probability of obtaining excess returns exceeded 70%. Among them, we observed that the plate is easier to obtain relative returns in January. 3) In addition, combined with the analysis of macro and policy environment, we find that the interpretation of bank year-end market needs more support from the improvement of economic expectations. Among them, in 2012 and 2014, it can be seen that under the pressure of steady economic growth, the macro-control at the end of the year changed from tight to loose, the fiscal policy was strengthened, the monetary policy was marginal loose, and the market was expected to stabilize and repair the economy under the introduction of multiple favorable policies, and the banks achieved obvious absolute and relative benefits at the end of the year. At the end of 2017, with the continuous promotion of China’s supply side reform, there was an inflection point in China’s economy. Under the background of upward economic repair, the market’s expectations for the improvement of the interest margin and asset quality of the banking industry led to the cross year market of bank stocks. From December to January 18, banks accumulated to outperform the Shanghai and Shenzhen 300 index by 4.4 percentage points.
How about the fundamentals of the banking sector next year? With the support of a moderate policy environment, bank fundamentals are expected to remain stable. Since the third quarter, the downward pressure on China’s economy has increased. The central economic work conference proposed for the first time that China’s economic development is facing “triple pressure of demand contraction, supply shock and weakening expectation”. In this context, the top-level policy objectives are inclined to steady growth. The second comprehensive RRR reduction was launched during the year. The central economic work conference mentioned that the fiscal policy in 2022 should “ensure the intensity of fiscal expenditure and accelerate the progress of expenditure”, and the monetary policy should be “flexible and appropriate, and maintain reasonable and sufficient liquidity”. Looking forward to 2022, we judge that the counter cyclical adjustment of policy will be strengthened, and banks are expected to usher in a relatively loose and mild regulatory environment. From the perspective of bank fundamentals, supervision has repeatedly emphasized the prevention of systemic risks. Under the bottom line thinking of supervision, we judge that the probability of large-scale credit risk release in the industry is small. With the support of mild policies, the industry fundamentals are expected to remain stable. In addition, considering that the first quarter is the traditional peak season for bank credit, the central economic work conference also mentioned that “the policy force is moderately advanced”, and the “good start” performance of the industry in 2022 under the policy support is worth looking forward to.
How to view the current investment opportunities of bank stocks? Pessimistic expectations “correction”, optimistic about valuation repair. At present, the valuation level of the sector is only 0.64x, which is at an absolute low in history. The implied non-performing rate corresponding to the valuation is about 12%. The market’s pessimistic expectations about the downward pressure of the economy and the quality of bank assets have been fully reflected. With the support of policies, it is recommended to pay attention to the valuation repair caused by the “correction” of excessive pessimistic expectations. On the other hand, from the comparison of the ups and downs of various industries since the beginning of the year, the style of the A-share market is significantly differentiated. The ups and downs of Dianxin and the cycle in 2021 are more than 50%. Coal and steel are also more than 40%. In contrast, the performance of banks is average, with an increase of only 4.2% since the beginning of the year. Therefore, from the transaction level, the plate market brought by the market style switching at the end of the year is also worth looking forward to. In terms of individual stocks, it is recommended to give consideration to asset quality performance and wealth management ability, be optimistic about China Merchants Bank Co.Ltd(600036) , Bank Of Ningbo Co.Ltd(002142) , Postal Savings Bank Of China Co.Ltd(601658) , and pay attention to high-quality regional banks with obvious marginal improvement: Bank Of Jiangsu Co.Ltd(600919) , Bank Of Nanjing Co.Ltd(601009) , Bank Of Chengdu Co.Ltd(601838) .
Risk tips: 1) the economic downturn leads to higher than expected pressure on the quality of industrial assets. 2) The downward interest rate led to a narrower than expected industry interest margin. 3) The escalation of Sino US friction has led to an increase in external risks.
