Highlights Review & focus next week – important news last week: 1) the financial stability and Development Commission of the State Council held a special meeting to respond one by one to the hot issues concerned by the recent market, including macro-economy, real estate, China concept stocks, platform economy rectification, Hong Kong financial market stability and so on, It also emphasized that “relevant departments should earnestly assume their responsibilities, actively introduce policies beneficial to the market and carefully introduce contractive policies”, so as to release a strong signal of stabilizing the market. 2) The people’s Bank of China and the China Banking and Insurance Regulatory Commission held a special meeting to convey, study and implement the spirit of the meeting of the financial committee of the State Council, actively respond to hot issues such as credit and real estate, and highlight that “monetary policy should take the initiative to respond, and new loans should maintain a moderate growth” “We will continue to improve the long-term mechanism of ‘stabilizing land prices, house prices and expectations’, actively promote the transformation of the development mode of the real estate industry, encourage institutions to carry out M & A loans in a stable and orderly manner, focus on supporting high-quality real estate enterprises to merge and acquire high-quality projects of difficult real estate enterprises, and promote the good cycle and healthy development of the real estate industry”. 3) CITIC Group and Beijing Financial Holding were granted the first batch of financial holding licenses in China, and the financial holding company officially entered a new era of licensed operation. Announcements of important companies: China Merchants Bank Co.Ltd(600036) issued the annual report of 2021, Shanghai Pudong Development Bank Co.Ltd(600000) issued the performance express of 2021, and China Zheshang Bank Co.Ltd(601916) allotment scheme was approved by the CBRC. Focus next week: the central bank announced the LPR quotation interest rate on Monday; On Thursday and Friday, a number of banks including ICBC, China Construction Bank, postal savings and Everbright will release their annual reports for 2021.
Market and valuation review – bank stocks rose and fell last week. (1) In the recent week, the Shenwan bank index fell by 0.22%, while the CSI 300 index fell by 0.94% in the same period. The banking sector outperformed the CSI 300 index by 72bps, ranking seventh among the 31 Shenwan level industries; (2) Among the sub sectors, stock banks performed better, with the index rising 0.94%, outperforming the CSI 300 index by 188bps; Urban commercial banks and rural commercial banks fell significantly, with the index falling 1.67% / 1.82% respectively, losing 73bps / 88bps of the Shanghai and Shenzhen 300 index respectively; The state-owned big bank index fell 0.90%, outperforming the Shanghai and Shenzhen 300 index by 4bps; (3) In terms of individual stocks, Bank of Lanzhou (8.17%), Bank Of Chongqing Co.Ltd(601963) (6.75%) and China Merchants Bank Co.Ltd(600036) (3.87%) led the rise, while Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) (- 4.80%), Wuxi Rural Commercial Bank Co.Ltd(600908) (- 4.68%) and Bank Of Ningbo Co.Ltd(002142) (- 4.67%) led the decline. Bank stock valuations remain low. Over the weekend, the overall Pb of the banking sector was 0.59 times and the CSI 300 component stocks were 1.49 times. From the deviation degree of the long-term trend, the valuation of the banking sector was undervalued compared with the CSI 300 component stocks.
Trend of interest rate and exchange rate – the capital level remained basically stable last week. The 7-day reverse repo interest rate in the inter-bank market decreased by 5bps to 1.99%, and the overnight Shibor interest rate decreased by 6bps to 1.99%. Last week, 50 billion reverse repos and 100 billion MLF expired in the open market. The central bank invested 140 billion reverse repos and 200 billion MLF. During the week, a total of 190 billion net investment was realized, of which the bid winning interest rate of MLF was 2.85%, the same as last month. In terms of exchange rate, the US dollar against RMB (CFETS) closed at 6.3615 last weekend, up 387 points from the previous weekend; The US dollar closed at 6.3675 against the offshore RMB, up 87 points from the previous weekend; The FOB / RMB spread increased by 300 points to – 60 points.
Investment proposal and investment object
The positive statements made by the China Securities Regulatory Commission, the central bank, the China Banking and Insurance Regulatory Commission and other relevant departments can predict that in the face of economic pressure and the goal of stable growth, the follow-up policy strength is expected to be further improved, and the underlying economy will continue to be overweight, which will help to repair the pessimistic expectations of the market. At present, the static Pb valuation level of the sector is only 0.59x, which is still at a historical low. Under the background of the continuous force of the steady growth policy, we are optimistic about the opportunity to repair the valuation of the sector and continue to maintain the “optimistic” rating of the industry.
In terms of individual stocks, it is suggested to pay attention to: 1) value targets with excellent historical profitability and leading asset quality represented by China Merchants Bank Co.Ltd(600036) ( China Merchants Bank Co.Ltd(600036) , Unrated) and Bank Of Ningbo Co.Ltd(002142) ( Bank Of Ningbo Co.Ltd(002142) , Unrated); 2) Undervalued targets represented by Industrial Bank Co.Ltd(601166) ( Industrial Bank Co.Ltd(601166) , not rated) and Postal Savings Bank Of China Co.Ltd(601658) ( Postal Savings Bank Of China Co.Ltd(601658) , not rated); 3) Urban rural commercial banks with strong regional economic advantages represented by Shanghai Rural Commercial Bank Co.Ltd(601825) ( Shanghai Rural Commercial Bank Co.Ltd(601825) , not rated), Bank Of Chengdu Co.Ltd(601838) ( Bank Of Chengdu Co.Ltd(601838) , not rated), Bank Of Nanjing Co.Ltd(601009) ( Bank Of Nanjing Co.Ltd(601009) , not rated).
Risk tips
The economic downturn exceeded expectations, resulting in higher than expected pressure on the asset quality of the industry.
The liquidity risk of real estate enterprises continues to spread, disturbing the asset quality of banks.
The strength of financial supervision rose more than expected.
