Summary of this issue:
Core view: the market will be in a performance vacuum in the next quarter, but] the performance of bond business in 2021 will continue to grow with certainty under the high base in 2020, and is expected to exceed 20% for two consecutive years. As a direct beneficiary, securities companies may have excess returns in the future. In the context of the great development of wealth management, the scale of public funds exceeds 25 trillion, and the issuance in 2022 is expected to exceed expectations. We continue to recommend the trademark of wealth management bonds. On the one hand, the “base content” we understand includes the performance increment brought to shareholders by the profit distribution of public fund subsidiaries, as well as the market’s optimistic about the development of asset management institutions; At the same time, taking the channel as the second main line, the consignment business has been gradually realized to the performance. At the same time, the asset quality after the full provision for impairment in the sector is consolidated, which also lays the foundation for the rise. Securities companies will not be absent in the spring market. It is recommended that investors focus on configuration. The insurance industry is still undergoing clean-up and rectification. The compensation second generation solves the two major problems of loose recognition of actual capital and easy traction of minimum capital by market risk. Mutual treasure plans to officially close down on January 28. We elaborated on the current situation and future development trend of the industry in our in-depth report “what are the worries of agents? Reference brokerage and bancassurance” last week, The mismatch between supply and demand is still the main contradiction in the current premium growth, the liability side of insurance enterprises is still under pressure, and the elasticity is still on the investment side.
Core targets: Gf Securities Co.Ltd(000776) , Zheshang Securities Co.Ltd(601878) , East Money Information Co.Ltd(300059) , China Pacific Insurance (Group) Co.Ltd(601601) , Ping An Insurance (Group) Company Of China Ltd(601318) , etc.
Market review: the main indexes rose this week, and the Shanghai composite index reported 3639.78 points, + 0.60%; Shenzhen stock index reported 14857.35 points, + 1.00%; The CSI 300 index reported 4940.37, + 0.39%; Gem 3322.67, + 0.78%; The CSI composite bond (net price) index was at 99.83, + 22bp. The average daily turnover of A-Shares in Shanghai and Shenzhen was 1010.558 billion yuan, a month on month increase of – 6.95%, and the balance of two financial institutions was 1841.58 billion yuan, a decrease of – 0.02% over last week. In terms of individual stocks, securities companies: Hongta Securities Co.Ltd(601236) + 6.05%, Gf Securities Co.Ltd(000776) + 3.97%, Caida Securities Co.Ltd(600906) + 3.52%; Insurance: Ping An Insurance (Group) Company Of China Ltd(601318) + 1.18%, New China Life Insurance Company Ltd(601336) + 1.124%, China Life Insurance Company Limited(601628) – 0.17%; Diversified Finance: Jingwei Textile Machinery Company Limited(000666) + 6.36%, Gi Technologies Group Co.Ltd(300309) + 5.92%, Sunny Loan Top Co.Ltd(600830) + 5.09%.
View of securities industry: it is expected that the performance of securities business in 2021 will grow steadily on the high base in 2020. In terms of brokerage business, the average daily turnover of the two cities in 2021 exceeded the record high in 2015. The average daily turnover of the two cities in the whole year was 1058.3 billion yuan, an increase of 24.76% over 848.2 billion yuan in 2020,; In terms of investment banking, 524 companies had IPOs in 2021, with a financing scale of 543.773 billion yuan, a year-on-year increase of 13.17%; The refinancing scale was 1.26 trillion, a year-on-year increase of 5.68%; The scale of debt commitment was 11.37 trillion, a year-on-year increase of 14.04% over 9.97 trillion in 2020; In terms of asset management business, the transition period of the new regulations on asset management is coming to an end, and the channel oriented asset management has been greatly reduced. The total scale of asset management has decreased from the peak value of 17 trillion before the new regulations to 8.64 trillion in 2021q3, with a pressure drop of nearly 50%. With the improvement of the industry’s active management ability, the asset management revenue has rebounded steadily. In the third quarter of 2021, the asset management revenue was 22 billion, a year-on-year increase of 3%; In terms of credit business, the average daily scale of the two financial institutions in 2021 was 1762 billion yuan, a year-on-year increase of + 37%. It is expected that the total revenue and net profit of the securities industry in the whole year will increase by 20% year-on-year.
Securities firms with excellent investment banking ability and outstanding wealth management business will have value revaluation opportunities. From 2021 to 2022, the Central Economic Work Committee mentioned the full implementation of the stock issuance registration system. Then, on December 30, Yi Huiman of the CSRC pointed out that after summarizing the experience of the pilot registration system of the science and innovation board, the gem and the Beijing stock exchange, the pilot has achieved the expected goal, the conditions for the whole market to realize the registration system have been gradually met, and the whole market registration system in 2022 is a foregone conclusion. Under the registration system, the number of enterprises meeting the listing standards will increase significantly, the issuance efficiency will be higher, and more high-quality companies will accelerate their landing in the A-share market; The registration system tests the asset pricing ability and sales ability of securities companies, the IPO rate is expected to increase, and the investment banking business in the securities industry is expected to see both volume and price rise. We believe that the head securities companies with strong asset pricing ability, sales ability and other comprehensive investment banking capabilities will fully benefit from the implementation of the whole market registration system. It is suggested to pay attention to: China International Capital Corporation Limited(601995) , China Securities Co.Ltd(601066) , Citic Securities Company Limited(600030) . In addition, wealth management revenue increases with the increase of customer assets and financial products, which has strong stability, and the rate of return is much higher than that of traditional brokerage business. The profitability of companies with outstanding product and service capabilities will continue to improve with the increase of the contribution of wealth management revenue. In the first three quarters, roe, the leading broker in wealth management business of securities companies, increased significantly, and the improvement effect of wealth management on the company’s profitability has been reflected in the net profit growth of each company. It is suggested to focus on 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 + Gf Securities Co.Ltd(000776) , Orient Securities Company Limited(600958) , China Industrial Securities Co.Ltd(601377) with high contribution of participating / holding public funds; 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. The current valuation of securities companies is PB1 79 times, the valuation still does not match the performance and asset quality, and the distance from PB2 There is still much room for 61x valuation center.
View of the insurance industry: on December 30, 2021, the CBRC officially issued the regulatory rules on solvency of insurance companies (II), which will be officially implemented from the first quarter of 2022. For insurance companies whose core solvency adequacy ratio or comprehensive solvency adequacy ratio drops significantly or falls below the regulatory critical point due to the switching between the old and the new (for example, the comprehensive solvency adequacy ratio drops below 150%, 120% or 100%, and the core solvency adequacy ratio drops below 75%, 60% or 50%), a certain transitional policy can be given and fully implemented no later than 2025. The recognition of actual capital is more strict and the capital quality is strengthened: 1) the future surplus of the insurance policy is included in the capital classification according to the term type, and the remaining term of the insurance policy entering the core Tier-1 capital shall be more than 30 years, the remaining term of the insurance policy entering the core tier-2 capital shall be more than 10 years and less than 30 years, and the remaining term of the attached Tier-1 capital shall be more than 5 years and less than 10 years; 2) Improve the recognition standards for investment real estate, stipulate that the investment real estate held by insurance companies shall be measured according to the cost model, and the evaluation value-added shall not be included in the actual capital, and guide the insurance funds to vigorously support the real economy; 3) For long-term equity investment, the impairment provision requirements are clearly defined to effectively reflect the actual value of long-term equity investment. For long-term equity investment (subsidiaries) with control, 100% full deduction of capital is implemented to guide insurance enterprises to focus on their main business. Comprehensive calibration of minimum capital: 1) comprehensively penetrate and penetrate to the end for the problem of multi-layer nesting, measure the minimum capital based on the underlying assets of actual investment, set a higher basic factor (0.6) for the assets that cannot be penetrated, 2) increase the proportion of insurance risk, and add a disease trend risk factor for the rising serious disease risk, 3) For long-term equity investments (subsidiaries) with control, the risk factor of the minimum capital requirements not related to the main business is increased to 1, 4) for equity assets and foreign currency assets, the risk factor is increased; 5) Appropriately reduce the capital requirements for some state supported assets: according to the long-term characteristics of exclusive endowment insurance products, 10% discount is given to the minimum capital of longevity risk, 10% discount is given to the minimum capital of green bond credit risk and the minimum capital of insurance risk of professional insurance technology companies, For agricultural insurance and investment assets with insurance funds supporting the national strategy, the capital requirements shall be appropriately reduced. We believe that the second generation of compensation will help guide insurance enterprises to return to the source of guarantee, focus on their main business, vigorously develop long-term and high-value businesses, promote insurance services to the real economy, and effectively prevent and resolve insurance risks. From the perspective of impact, no matter the insurance business or investment business, the second generation phase II project has generally improved the risk factor, so it will bring some pressure on the comprehensive solvency adequacy ratio of insurance enterprises. Head insurance companies are expected to be less affected due to their high profitability and risk control ability. For insurance companies with more aggressive business and investment, their solvency may not meet the standard, but one company and one policy will enable these insurance companies to optimize their operation and risk management, and the solvency risk will be controllable in the future.
On December 28, 2021, mutual treasure officially announced its intention to officially shut down on January 28. From the date of the announcement, the existing mutual treasure members will no longer participate in mutual assistance apportionment. The apportionment originally scheduled to be deducted on the date of the announcement and the two installments of apportionment in January 2022 will be borne by the mutual treasure platform. The sick members who were initially diagnosed before January 28, 2022 and were in the mutual assistance plan at the time of diagnosis can still initiate mutual assistance application within 180 days from the date of initial diagnosis of the hospital, and the mutual assistance fund shall be borne by the mutual treasure platform. The platform provides insurance protection transformation scheme and monthly payment severe illness products with high cost performance, which will improve the transformation rate of commercial insurance in the future. We believe that the increase in the amount of contribution, the rise of Huimin insurance and the regulatory provisions on licensed operation are important factors for the closure of mutual treasure. 1) Adverse selection increased, the amount of contribution increased, and the industry entered a death spiral. In December 2021, the number of people assessed in the first phase was only 75.87 million (the highest exceeded 100 million), while the number in the second phase further decreased to 71.18 million. In 2018, the apportionment amount of the first phase was only 3 points, but by December 2021, the apportionment amount of the first phase had exceeded 7 yuan, totaling 15 yuan per month. 2) Huimin insurance began to rise in 2020 and broke out in 2021. Compared with the rising price of mutual treasure, it has highlighted the cost performance of mutual treasure, and has the endorsement of government departments, which has formed a substitution effect on network mutual aid. 3) industry supervision and rectification of mutual aid products, Clear licensed operation. Since 2020, all departments have increased the supervision of network mutual assistance. The cbcirc once believed that network mutual assistance lacked a clear regulatory body and regulatory policies, involved a large number of people, was an illegal licensed operation, and some platforms formed capital precipitation through pre charging, which was at risk of running away. The measures for the supervision of Internet insurance business promulgated at the end of 2020 emphasized licensed operation, prohibited non insurance institutions from carrying out Internet insurance business, and further strengthened the crackdown on the internet mutual assistance industry. We believe that, to some extent, by reducing the threshold of serious illness insurance and insurance popularization, network mutual assistance has improved the protection awareness and consumer demand of people in the sinking market. The shutdown of mutual assistance will improve the conversion rate of commercial insurance and benefit people’s Insurance and Internet insurance with stronger online access and service ability.
Looking forward to the first quarter, both ends of asset negative are still under pressure, and the valuation is still low. Liability side: under the comprehensive influence of factors such as the lower than expected effective manpower growth of insurance enterprises in the post epidemic era and the mismatch between customer demand and agent quality, we expect that the pressure on the liability side will still exist this year. Considering the lagging start, the increase in production capacity is difficult to offset the decline in the number of agents, and the impact of the high base brought by the suspension of severe illness speculation in the same period last year, the performance in the first quarter may continue to be under pressure. On the asset side, affected by the economic downturn, the weight of RRR reduction combined with steady growth in economic operation has increased, and the medium and long-term interest rates are still under downward pressure. We judge that the epidemic situation and the emergence of policy benefit insurance have accelerated residents’ awareness of insurance, led to the mismatch between supply and demand, and exposed the disadvantages of traditional agent sales channels. With the decline of agent dividends, third-party sales channels are expected to rise, especially the brokerage channels benefiting from the development of the Internet and the high-quality offline sales personnel, as well as the significant improvement of nbvm and the bancassurance channels benefiting from the “deposit moving” and the establishment of pension accounts. The current share prices of Guoshou, Ping An, Taibao and Xinhua 2021epev are 0.7x, 0.63x, 0.52x and 0.45X respectively.
Liquidity view: in terms of volume, the central bank invested a net 530 billion yuan in the open market this week, including 650 billion yuan in reverse repurchase, 50 billion yuan in withdrawal, and 70 billion yuan in fixed deposit of treasury cash due. 700 billion yuan of reverse repurchase will expire next week. In terms of price, the short-term capital interest rate rose this week. The weighted average inter-bank offered rate rose 41bp to 2.37%, and the inter-bank pledged repo rate rose 39bp to 2.42%. R001 goes up 49bp to 2.37%, R007 goes up 48bp to 2.55%, and dr007 goes up 39bp to 2.29%. Shibor’s overnight interest rate rose 29BP to 2.13%. Interbank certificates of deposit issue interest rates vary. The yield of one-year treasury bond decreased by 11bp to 2.23%, the yield of 10-year Treasury bond decreased by 5bp to 2.77%, and the term spread expanded by 6BP to 0.54%. Considering that the central economic work conference mentioned that the importance of steady growth has increased, the policy has been relaxed and overweight, and the recent epidemic has gradually become severe, there will still be downward pressure on medium and long-term interest rates in the future. In the follow-up, we still need to pay attention to the process of widening credit and opening the tightening cycle in the United States.
Diversified financial perspective: focus on the trust and financial holding sectors that benefit from stimulating economic policies.
Risk factors: the deterioration of the covid-19 epidemic, the decline of China’s economy beyond expectations, the decline of long-term interest rates 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 rates, the pressure of agents to fall off, lower than expected insurance sales, the uncertainty of the impact of capital market fluctuations on performance, etc.
