Core view: the main contradiction in the current market is that China’s liquidity easing expectation of steady growth and real estate fundamentals have not yet reached the bottom. With the cashing pressure of some real estate enterprises, the policy level will be more specific and clear in the future. “Ensuring completion” has become the primary task, and steady growth has become the main theme of the stage. On January 7, the CSRC announced that the Sci-tech Innovation Board plans to introduce a market making mechanism. Reference to overseas experience will help to improve liquidity and stability. We believe that the undervalued and stable growth sector is expected to continue to worry before the Spring Festival, and the securities sector, as the subject of direct benefit, may have excess returns in the future. The performance support brought by investment banking and wealth management and the consolidation of asset quality after full provision for impairment have laid the foundation for the rise of the sector. Investors are advised to focus on allocation. The reform of the insurance industry is under way. The in-depth report “how to solve the worries of agents? Reference brokerage and bancassurance – special report on long-term space of insurance (III)” released by us clearly describes the current situation and future development trend of the industry. The mismatch between supply and demand is still the main spear and shield for premium growth, the liability side of insurance enterprises is still under pressure, and the elasticity is still on the investment side. The upward interest rate will raise the insurance valuation and positively affect eV by affecting the adjusted net assets. We expect listed insurance companies to achieve 12% – 16% growth in 2022eev. The 2022epev of Guoshou, Ping An, Taibao, Xinhua and AIA corresponding to the current stock price are 0.63x, 0.59x, 0.44x, 0.40x and 1.6x respectively.
Core targets: Gf Securities Co.Ltd(000776) , Zheshang Securities Co.Ltd(601878) , China stock market news, China Greatwall Securities Co.Ltd(002939) , China Pacific Insurance (Group) Co.Ltd(601601) , Ping An Insurance (Group) Company Of China Ltd(601318) , etc.
Market review: the main indexes fell this week, and the Shanghai composite index reported 3579.54 points, – 1.65%; Shenzhen stock index reported 14343.65 points, -3.46%; CSI 300 index reported 4822.37, – 2.39%; Gem 3096.88, -6.80%; The CSI composite bond (net price) index was at 99.81, -2bp. The average daily turnover of A-Shares in Shanghai and Shenzhen was 1228.828 billion yuan, a month on month increase of + 21.60%, and the balance of two financial institutions was 1830.956 billion yuan, a decrease of – 0.07% from last week. In terms of individual stocks, securities companies: Guolian Securities Co.Ltd(601456) + 4.87%, Founder Securities Co.Ltd(601901) + 1.79%, Changjiang Securities Company Limited(000783) + 0.93%; Insurance: Ping An Insurance (Group) Company Of China Ltd(601318) + 5.02%, China Pacific Insurance (Group) Co.Ltd(601601) + 2.95%, New China Life Insurance Company Ltd(601336) + 2.57%; Diversified Finance: Kunwu Jiuding Investment Holdings Co.Ltd(600053) + + 8.90%, Rendong Holdings Co.Ltd(002647) + 5.59%, Luxin Venture Capital Group Co.Ltd(600783) + 4.33%.
View of the securities industry: on January 7, the CSRC announced that it plans to introduce the market maker mechanism into the science and innovation board, solicit opinions on the pilot provisions on stock market making trading business of securities companies on the science and Innovation Board (Draft for comments), and make arrangements for market making securities source arrangement, access conditions, access procedures, risk detection and monitoring, supervision and law enforcement, etc. In terms of the arrangement of market making securities sources, the market making provisions clearly allow the purchase of stocks as securities sources. You can use your own stocks, or the stocks accessed from China Securities Fund or other stocks with disposal rights, which is conducive to enriching securities sources and avoiding disturbance to individual stock prices. In terms of internal control requirements, securities companies are required to improve the business isolation system, prevent the improper flow of sensitive information and strictly prevent conflicts of interest; It is required to establish and improve the internal control and decision-making process of market making trading business to ensure the orderly development of business; It is required to strengthen the management of market making transactions, improve the risk prevention and control of honest practitioners and anti money laundering requirements, and prevent illegal acts such as interest transfer and insider trading. In terms of risk monitoring, securities companies are required to incorporate market making trading business into the comprehensive risk management system, improve risk detection indicators, calculate and fill in risk control indicators with reference to the self owned stock standard. In principle, the market making shareholding of science and Innovation Board shall not exceed 5%.
After the implementation of the overseas market maker system, liquidity has increased significantly. In December 1998, Japan’s JASDAQ introduced the market maker system (similar to the current China Science and Innovation Board) on the basis of the continuous bidding trading system, and selected some stocks to trade in a quotation driven manner. After the implementation of the market maker system, the trading volume increased significantly, up to 20 times. Since then, JASDAQ has gradually expanded the range of stocks traded by market makers, accounting for 18% of the overall market, 26.5% of the market making transactions and 23.9% of the trading volume. The introduction of the market maker system into the Kechuang board will improve the market liquidity and stability. At present, the total market value of the science and Innovation Board accounts for 5.87% of the A shares, but the average daily turnover fluctuates at 43 billion yuan, accounting for only 4.08% of the A shares turnover, which is lower than the market value, and the liquidity is poor. The introduction of market maker system is conducive to increasing market liquidity and activating the market, so as to increase business income such as brokerage and self operation. In addition, the stocks of companies with poor liquidity on the science and Innovation Board may rise and fall sharply when the trading volume is enlarged. The participation of market makers will effectively curb market speculation and increase market stability. Securities companies with high standards of access conditions, strong capital strength and strict risk control will fully benefit. In terms of pilot qualification and access conditions, on the basis of perfect business plans, professionals, technical systems and other conditions, there are two hard standards: classification rating above class A for three consecutive years and net capital exceeding 10 billion in the last 12 months. At present, 26 securities companies meet this standard, with strong capital strength and outstanding research ability Head securities companies with strong compliance and risk control ability are expected to obtain the pilot qualification of the first batch of market makers on the science and innovation board.
The implementation of the board transfer system of the Beijing stock exchange is an important link in the construction of multi-level capital market, and the liquidity is expected to be improved. On January 7, the CSRC issued the guidance on the board transfer of Listed Companies in Beijing stock exchange, which made it clear that after one year of listing on the Beijing stock exchange, they can apply for board transfer to the science and Innovation Board of Shanghai Stock Exchange or the gem of Shenzhen Stock Exchange. The conditions for board transfer are consistent with the conditions for the initial public offering of science and innovation board and gem, and their listing time at the original selection level and the listing time of Beijing stock exchange can be calculated together. The implementation of the board transfer mechanism means that the board transfer mechanism from the new third board to the Beijing stock exchange and then to the Shanghai and Shenzhen stock exchange is fully opened, which further improves the attraction of the companies to be IPO. At the same time, it also brings a profit-making effect to the Beijing stock exchange market, and the liquidity of the Beijing stock exchange is expected to be further improved.
Under the background of the whole market registration system and the great development of wealth management, securities companies with excellent investment banking ability and outstanding wealth management business are expected to obtain value revaluation opportunities. Investment banking lines are suggested to focus on China International Capital Corporation Limited(601995) , China Securities Co.Ltd(601066) , Citic Securities Company Limited(600030) with strong asset pricing ability, sales ability and risk control ability. It is suggested that the wealth management line pay attention to 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 74 times, the valuation still does not match the performance and asset quality, which is 2.5 times away from PB2 There is still much room for 61x valuation center.
View of insurance industry: on December 31, the CBRC issued a note entitled “Notice of the general office of the CBRC on matters related to the rectification of bank agency insurance business”, the core content of which is 1) to give the rectification period of bancassurance business one year, and 2) the bank insurance Wuxi Online Offline Communication Information Technology Co.Ltd(300959) integration business section shall refer to the previous provisions during the rectification period, Online sales or e-sales that meet the requirements (the legal entity establishes a unified centralized business platform and processing process, implements centralized operation and unified management, and complies with the relevant provisions of the China Banking and Insurance Regulatory Commission) may not be limited by the “1 + 3” physical outlets. 3) they must be recorded in both ways. Those who sell life insurance products through Wuxi Online Offline Communication Information Technology Co.Ltd(300959) integration can be recorded remotely.
Previously, the market was worried that small and medium-sized insurance companies needed to meet the regulatory requirements of Wuxi Online Offline Communication Information Technology Co.Ltd(300959) business because their Wuxi Online Offline Communication Information Technology Co.Ltd(300959) integration business was non pure Internet business. Subject to the “1 + 3” constraint, it would bring certain pressure on the scale of bank premium. At the same time, due to the increase of bank initiative, the insurance commission rate would also face great pressure. The note gives a one-year rectification period, which helps to cushion the pressure of the contraction of the scale of small and medium-sized insurance institutions, ensure a smooth transition, and support the stable development of the industry on the basis of safeguarding the legitimate rights and interests of consumers.
Looking forward to this year, the liability side: we expect that the pressure on the liability side will still exist this year due to the comprehensive impact 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. 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 in the same period last year, the performance in the first quarter may continue to be under pressure. On the asset side, the central economic work conference set the tone for steady growth. There was great pressure to maintain growth in the first half of this year. The orientation of active fiscal policy and broad monetary policy was clear. Marginal easing policies such as reducing reserve requirements and interest rates are still worth looking forward to and are expected to underpin economic growth. Broad currency may gradually bring broad credit in the second half of the year, and the growth rate of social finance is expected to pick up. Superimposed with the expectation of interest rate increase in the United States, the long-term interest rate may usher in an inflection point. The elasticity of the insurance industry is still on the investment side. 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 0.63x, 0.59x, 0.44x and 0.40x respectively.
Liquidity view: in terms of volume, the central bank’s net investment in the open market this week was – 660 billion yuan, including 40 billion yuan in reverse repurchase and 700 billion yuan in return. 40 billion yuan of reverse repurchase will expire next week. In terms of price, the short-term capital interest rate fell this week. The weighted average inter-bank offered rate decreased by 46bp to 1.91%, and the inter-bank pledged repo rate decreased by 51bp to 1.91%. R001 down 49bp to 1.88%, R007 down 42bp to 2.13%, dr007 down 24bp to 2.05%. Shibor’s overnight interest rate fell 29BP to 1.84%. The issuing interest rate of interbank certificates of deposit decreased. The yield of one-year treasury bond decreased by 1bp to 2.22%, the yield of 10-year Treasury bond increased by 5bp to 2.82%, and the term spread expanded by 6BP to 0.60%. 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.
