Core view
Highlights Review & focus next week – important news last week: 1) financial stability law (opinion draft) was launched. On April 6, the central bank drafted the financial stability law of the people’s Republic of China (Draft for comments), which makes clear provisions on risk prevention, resolution, disposal and accountability. Starting from the top-level design, it improves the supervision of financial risks and provides a basic legal guarantee for the long-term safety and stability of China’s financial system. 2) The national Standing Committee stated that it would strengthen the implementation of prudent monetary policy. Li Keqiang presided over the executive meeting of the State Council on April 6. The meeting clearly pointed out that we should still put steady growth in a more prominent position, strengthen the implementation of prudent monetary policy and maintain reasonable and abundant liquidity. 3) The China Banking and Insurance Regulatory Commission issued the notice on the key work of comprehensively promoting rural revitalization in banking and insurance services in 2022, which made it clear that it was necessary to increase the supply of agriculture related credit and put forward the overall goal of ensuring the stable growth of agriculture related credit investment. Announcement of important companies: Bank Of Ningbo Co.Ltd(002142) release 21 annual reports China Minsheng Banking Corp.Ltd(600016) shareholder oceanwide group’s 1.8 billion shares were frozen by rotation. Next week’s attention: on Monday, the Bureau of statistics released the price data of March; On Wednesday, the central bank released financial data for March.
Market and valuation review – the bank continued to rise last week. (1) In the recent week, the Shenwan bank index rose by 1.21%, while the Shanghai and Shenzhen 300 index fell by 1.06% in the same period. The banking sector outperformed the Shanghai and Shenzhen 300 index by 2.27pct, ranking 8th among 31 Shenwan level industries; (2) Among the sub sectors, urban commercial banks performed best, with the index rising 2.13%, outperforming the CSI 300 index by 3.19pct; (3) In terms of individual stocks, the top gainers are Qilu Bank Co.Ltd(601665) (17.63%), Bank Of Nanjing Co.Ltd(601009) (5.37%) and Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) (4.94%), and the top gainers are Bank Of Chongqing Co.Ltd(601963) (- 2.39%), China Citic Bank Corporation Limited(601998) (- 2.86%) and Jiangsu Jiangyin Rural Commercial Bank Co.Ltd(002807) (- 4.36%). Bank stock valuations remain low. At the end of last week, the overall Pb of the banking sector was 0.63 times and the CSI 300 component stocks were 1.47 times. From the perspective of the deviation degree of the long-term trend, the valuation deviation degree of the banking sector relative to the CSI 300 component stocks was at the historical position of 12% in the past 13 years, and the sector is still deeply undervalued.
Trend of interest rate and exchange rate — marginal convergence of capital last week. The 7-day reverse repo rate in the inter-bank market rose 15bps to 1.94%, and the overnight Shibor rate rose 44bps to 1.75%. Last week, the central bank did not conduct MLF operation, and the open market achieved a total of 580 billion net return. In terms of exchange rate, the US dollar against RMB (CFETS) closed at 6.3644 last weekend, up 24 points from the previous weekend; The US dollar closed at 6.3686 against offshore RMB, up 8 points from the previous weekend; The FOB / RMB spread increased by 16 points to – 42 points.
Investment proposal and investment object
Recently, the trend of bank stocks has been strong, but the overall valuation level is still at an all-time low. This week, the national Standing Committee once again made it clear that steady growth should be placed in a more prominent position and urged all departments to timely introduce measures conducive to the stability of market expectations. It can be predicted that under the pressure of steady growth, the policy is expected to further support the economy, so as to provide effective support for the fundamental operation of banks. Looking forward to the second quarter, we are still optimistic about the repair opportunities of sector valuation brought by the “correction” of overly pessimistic market expectations, 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 Bank Of Communications Co.Ltd(601328) ( Bank Of Communications Co.Ltd(601328) , Unrated), Postal Savings Bank Of China Co.Ltd(601658) ( Postal Savings Bank Of China Co.Ltd(601658) , buy), Industrial Bank Co.Ltd(601166) ( Industrial Bank Co.Ltd(601166) , Unrated); 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 duration and coverage of the epidemic exceeded expectations.
