Core view: CITIC issued a faster than expected performance report, and the placement of shares that have been suppressing the stock price is landing, and the leading securities companies are expected to lead the sector rebound. We believe that before the Spring Festival, with the clearer fundamentals of real estate companies, the undervalued and stable growth sector is expected to continue to worry, and the securities companies, as the direct beneficiary, may have excess returns in the future. Under the background of residents’ asset transfer, some securities companies are expected to be revalued as “shadow stocks” of fund companies. The implementation of the registration system on the main board this year will also bring strong performance support to investment banks. Investors are advised to focus on allocation. The reform of the insurance industry is under way. Our in-depth report “what are the worries of agents? Reference brokerage and bancassurance” clearly describes the current situation and future development trend of the industry. 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. The upward interest rate will raise the insurance valuation and positively affect eV by affecting the adjusted net assets. We expect that 2022e EV, a listed insurance company, is expected to grow by 12% – 16%. The PEV of Guoshou, Ping An, Taibao, Xinhua and AIA 2022e corresponding to the current stock price are 0.6x, 0.57x, 0.47x, 0.41x and 1.6x respectively.
Core targets: Citic Securities Company Limited(600030) , 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: major indexes rose and fell this week, and the Shanghai composite index reported 3521.26 points, – 1.63%; Shenzhen stock index reported 14150.57 points, -1.35%; The CSI 300 index reported 4726.73, – 1.98%; Gem 3119.41, + 0.73%; The CSI composite bond (net price) index was at 99.95, + 14bp. The average daily turnover of A-Shares in Shanghai and Shenzhen was 1236.041 billion yuan, a month on month increase of + 0.59%, and the average daily turnover rate was 1.62%, a month on month increase of -1.78bp; The balance of two financial institutions was 1814.775 billion yuan, up + 0.01% from last week. As of January 16, 2022, the scale of equity + hybrid funds was 8.38 trillion yuan, a month on month increase of + 0.29%, and the scale of newly issued equity funds this week was 11.167 billion yuan, a month on month increase of + 92.20%. In terms of individual stocks, securities companies: Central China Securities Co.Ltd(601375) + 2.27%, China International Capital Corporation Limited(601995) + 0.11%, Chinalin Securities Co.Ltd(002945) – 0.32%; Insurance: The People’S Insurance Company (Group) Of China Limited(601319) – 2.30%, China Pacific Insurance (Group) Co.Ltd(601601) – 2.90%, New China Life Insurance Company Ltd(601336) – 3.21%; Diversified Finance: Hainan Haide Capital Management Co.Ltd(000567) + 7.80%, Nanhua Futures Co.Ltd(603093) + 5.24%, Kunwu Jiuding Investment Holdings Co.Ltd(600053) + 4.71%.
View of the securities industry: on January 15, the CSRC solicited opinions from the market on the proposed revised Measures for the administration of securities registration and settlement, started the reform of DVP and improved the settlement system for institutional investors. The reform made it clear that during the transaction settlement of institutional proprietary and custody business, the securities at the end of t day are no longer unconditionally transferred, but are related to capital settlement, that is, “pay money and pay securities with one hand”; The association between securities settlement and capital settlement is established by setting the “lock for sale settlement” logo, so as to form a default disposal arrangement covering brokerage, margin trading, trusteeship, self operation and other businesses. DVP system is the basic system commonly used in mature markets such as Europe, America, Japan and Hong Kong. In the past, only the brokerage and margin trading business of individual investors complied with DVP system. This reform further improved the settlement system of institutional investors, strengthened the security of the settlement system from the system, and was conducive to attracting foreign investment into the market. At the same time, China Clearing implements the mechanism of reducing the settlement reserve, introducing the mechanism of differential minimum payment proportion of settlement reserve, reducing the minimum payment proportion of settlement reserve of settlement participants, and realizing the minimum provision proportion of stock business from the existing overall 18% to 15%, which will help to reduce the occupation of market funds, improve the efficiency of institutional fund use, and benefit the brokerage and Margin trading and proprietary trading.
In 2021, the performance of some bond businesses exceeded expectations. As of January 15, 2022, Central China Securities Co.Ltd(601375) and Zhejiang merchants have issued the announcement of performance pre increase in 2021, Central China Securities Co.Ltd(601375) is expected to realize the net profit attributable to parent company of 375 million yuan – 456 million yuan in 2021, with a year-on-year increase of 360% – 437%, Zheshang Securities Co.Ltd(601878) is expected to realize the net profit attributable to parent company of 2.115 billion yuan – 2.287 billion yuan in 2021, with a year-on-year increase of 30% – 40%; Citic Securities Company Limited(600030) released the performance express, and achieved an operating revenue of 76.570 billion yuan in 2021, with a year-on-year increase of 40.80%; The net profit attributable to the parent company was 22.979 billion yuan, a year-on-year increase of 54.20%.
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. Under the registration system, the scale and income of investment banking business are concentrated to the head. Since the pilot registration system was established on the science and innovation board in 2019, a total of 646 listed companies with registration system have landed a shares, including 69 IPOs with Citic Securities Company Limited(600030) underwriting and recommendation registration system, ranking first in the industry; The underwriting and recommendation scale is RMB 100.051 billion, accounting for 13.62% of the total scale of the registration system, second only to China International Capital Corporation Limited(601995) , ranking second in the industry; The underwriting and recommendation income was RMB 5.071 billion, accounting for 12.12% of the total underwriting and recommendation income of the registration system, ranking first in the industry. The head securities companies have advantages in talent reserve, research ability, asset pricing ability and sales ability. The market share of the registration system is concentrated in the head. Up to now, the number of registered IPOs Cr5 is 38.08%, the underwriting scale Cr5 is 56.25%, and the underwriting sponsor income Cr5 is 48.94%, respectively higher than 29% / 49% / 36% of the number, scale and income Cr5 of all A-share IPOs. The central economic work conference has set the tone that the comprehensive registration system will be realized in 2022, which will bring performance increment to the head securities companies with stronger comprehensive strength. It is suggested to pay attention to: Citic Securities Company Limited(600030) , China International Capital Corporation Limited(601995) , China Securities Co.Ltd(601066) , Huatai Securities Co.Ltd(601688) , Haitong Securities Company Limited(600837) . 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 the insurance industry: on January 14, the CBRC officially issued the measures for the administration of connected transactions of Bancassurance institutions, which will come into force on March 1, 2022.
Compared with the previous provisions, the measures pay more attention to substance than form, and further optimize related party management, related party transaction management, internal mechanism, regulatory measures, etc. The measures restrict the proportion of related party transactions used by insurance institutions, and stipulate that the total book balance of all related parties invested by insurance institutions shall not exceed the lower of 25% of the total assets at the end of the previous year and the net assets at the end of the previous year; In the book balance of investment equity assets, real estate assets, other financial assets and overseas investment, the amount of investment in related parties shall not exceed 30% of the above asset investment limit. In terms of prohibitions, it is stipulated that bancassurance institutions shall not evade the approval or regulatory requirements of major related party transactions by covering up related party relationships, splitting transactions and other covert ways, and shall not use various nested transactions to lengthen the financing chain, blur the business essence, evade regulatory provisions, and shall not illegally finance, transfer assets, idle arbitrage Hidden risks, etc. Insurance institutions shall not break through regulatory restrictions in disguised form through real estate projects, non insurance subsidiaries, trust plans, asset management product investment, or other channels and nesting methods to provide financing for related parties in violation of regulations; A bank insurance institution whose corporate governance supervision evaluation result is level E shall not carry out credit granting, fund utilization and fund-based related party transactions. In addition, the number of pledged equity of shareholders holding more than 5% of the equity of a bancassurance institution exceeds 50% of the total equity of the bancassurance institution, and the supervision can restrict them from carrying out related party transactions with bancassurance institutions. The measures clarify the types of related party transactions, restrict the use of insurance funds, set prohibitive provisions, and adhere to the principle of substance over form and penetration, which will help to standardize the behavior of bank insurance related party transactions, prevent improper benefit transmission and multi-layer nested arrangements, and improve the level of institutional related party transactions.
Listed insurance companies released premium data in December. In terms of life insurance, the annual growth rates of original premiums of Guoshou, Ping An, Xinhua and PICC were 1.2%, – 4.0%, 2.5% and 0.7% respectively (the growth rates in the previous November were 1.2%, – 4.0%, 1.7% and 2.2% respectively). In December, the growth rate of original premium scale of Guoshou, Ping An, Xinhua and PICC was – 0.4%, – 4.5%, 20.4% and – 22.7% (the growth rate in December was – 8.7%, – 8.7%, 4.3% and 59.6%). In addition to PICC, the premium growth rate of various insurance companies has improved, mainly due to the increased efforts to close the whole year at the end of the year. In terms of the performance of new orders, the annual growth rate of new orders of Ping An personal insurance was – 2.8% (the same period last year – 19.8%), mainly due to the low base in the same period last year and the high growth of savings products, which drove the growth rate of premiums in the first year of personal insurance channels significantly faster than the decline of manpower, but turned negative compared with June this year (YoY + 2.3%). Considering the impact of the high base, the rise of human capacity is difficult to offset the decline of scale, the delay of the start-up, and the short-term effectiveness of life insurance reform, the growth of life insurance premium will still be weak in 2022. In terms of property insurance, the impact of the comprehensive reform base of auto insurance has subsided, and the premium of auto insurance has continued to improve. In the first 12 months, the original premiums of Ping An finance and PICC finance increased by – 5.5% and 3.8% respectively (in the first 11 months, they were – 7.3%, 3.9% and 1.6% respectively). The premiums of all insurance companies in a single month were warmer than that of the previous month. The growth rates of Ping An, CPIC and PICC in December were 14.2% and 30.4% respectively (4.4%, 5.1% and 13.4% in a single month in November), which was due to the fading influence of the auto insurance base and the continuous improvement of auto insurance premiums. The monthly premium of PICC motor insurance in December was + 10.3% (it was + 9.5% in November). Comprehensive reform and new regulations on new energy vehicles will lead to continued compression of auto insurance underwriting profits, and large insurance enterprises with strong scale effect and pricing advantages are expected to benefit. In terms of non auto insurance, PICC non auto insurance increased significantly in a single month in December, with a year-on-year increase of + 100.7% (24.8% in November), but underwriting profit is still under pressure. 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 PEV of Guoshou, Ping An, Taibao and Xinhua 2020e corresponding to the current stock price are 0.60x, 0.57x, 0.47x and 0.41x respectively.
Liquidity view: in terms of volume, the central bank invested a net 10 billion yuan in the open market this week, including 50 billion yuan in reverse repurchase and 40 billion yuan in return. Next week, 50 billion yuan of reverse repurchase and 500 billion yuan of MLF will expire. In terms of price, the short-term capital interest rate rose this week. The weighted average interbank offered rate rose 38bp to 2.29%, and the inter-bank pledged repo rate rose 37bp to 2.28%. R001 goes up 38bp to 2.26%, R007 goes up 21bp to 2.34%, and dr007 goes up 16bp to 2.21%. Shibor’s overnight interest rate rose 37bp to 2.21%. The issuing interest rate of interbank certificates of deposit rises at the short end. The yield of one-year treasury bond decreased by 4bp to 2.18%, the yield of 10-year Treasury bond decreased by 3bp to 2.79%, and the term spread expanded by 1bp to 0.6%. 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 situation has become increasingly severe, we need to pay attention to the extension of credit and the drag on the bottom of the long-term interest rate caused by the opening of 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 covid-19 epidemic situation, the unexpected decline of China’s economy, the decline of long-term interest rate, the better start than expected, the tightening of financial regulatory policies, the risk of spread loss caused by low interest rate, the pressure of agent shedding, lower than expected insurance sales, the uncertainty of the impact of capital market fluctuations on performance, etc
