Summary of this issue:
Core view: this week, the excess return of securities companies was obvious. 10 securities companies issued performance forecasts, most of which grew by more than 30%. They still recorded a high increase under the high base in 2020, which laid a solid foundation for the rise. The central bank lowered 1-year and 5-year lpr10bp and 5bp respectively, with sufficient liquidity and continuous policy blowing, and the non banking situation is expected to continue. At the same time, under the background of residents’ asset transfer, some securities companies are expected to be revalued as “shadow stocks” of fund companies, and investors are recommended to focus on allocation. The reform of the insurance industry is under way. Our in-depth report “how to solve 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. From the premium data in December, with the increase of closing efforts, the liability side has improved, but looking forward to 2022, Agent quality improvement and premium sales are still under pressure, and the elasticity is still on the investment side.
Market review: the main indexes rose and fell this week, and the Shanghai composite index reported 3522.57 points, + 0.04%; Shenzhen stock index reported 14029.55 points, -0.86%; The CSI 300 index reported 4779.31, + 1.11%; Gem 3034.68, – 2.72%; The China Securities composite bond (net price) index was reported at 100.39, + 42bp. The average daily turnover of A-Shares in Shanghai and Shenzhen stock markets was 1099.87 billion yuan, a month on month increase of + 2.34%, and the average daily turnover rate was 1.43%, a month on month increase of + 0.08bp; The balance of the two financial institutions was 1795.77 billion yuan, down from – 0.78% last week. As of January 23, 2022, the scale of equity + hybrid funds was 8.58 trillion yuan, a month on month increase of + 2.62%, and the scale of newly issued equity funds this week was 16.237 billion yuan, a month on month increase of + 45.40%. In terms of individual stocks, securities companies: Chinalin Securities Co.Ltd(002945) + 13%, Guolian Securities Co.Ltd(601456) + 8.65%, Central China Securities Co.Ltd(601375) + 7.86%; Insurance: Ping An Insurance (Group) Company Of China Ltd(601318) + 4.79%, China Pacific Insurance (Group) Co.Ltd(601601) + 4.06%, New China Life Insurance Company Ltd(601336) + 3.65%; Diversified Finance: Shanghai Aj Group Co.Ltd(600643) + 9.30%, SDIC a + 3.09%, Cofco Capital Holdings Co.Ltd(002423) + 1.57%.
View of the securities industry: 10 securities companies released 2021 performance forecast / express, and 70% of the securities companies’ net profit increased by more than 30%. As of January 22, 2022, a total of 10 listed securities companies have issued pre increase announcements / performance letters for 2021. Among them, China stock market news, Founder Securities Co.Ltd(601901) , Central China Securities Co.Ltd(601375) net profit growth ranks first. China stock market news is expected to realize a net profit attributable to the parent company of 4.825 billion yuan in 2021, with a year-on-year increase of 66.90%, Founder Securities Co.Ltd(601901) , Central China Securities Co.Ltd(601375) net profit in 2021 is expected to be 50% – 70% respectively 360% – 437% year-on-year growth; The growth rate of Citic Securities Company Limited(600030) , Everbright Securities Company Limited(601788) net profit exceeded 50%, and the growth rate of Guoyuan Securities Company Limited(000728) , Zheshang Securities Co.Ltd(601878) , Guotai Junan Securities Co.Ltd(601211) net profit exceeded 30%. In 2021, the performance of securities business grew steadily under the high base of 2020. It is expected that the net profit growth of most listed securities companies will exceed 30%, laying a solid foundation for the rise of the sector.
Under the background of the full market registration system and the great development of wealth management, we believe that securities companies with excellent investment banking ability and prominent wealth management business are expected to obtain value revaluation opportunities. We suggest actively layout the securities companies along the two main lines of investment banking and wealth management. 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. 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%, which is respectively higher than 29% / 49% / 36% of the number, scale and income Cr5 of all A-share IPOs. The central economic work conference 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) . The wealth management line suggests paying 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 + high contribution of participating / holding public funds Gf Securities Co.Ltd(000776) , Orient Securities Company Limited(600958) , China Industrial Securities Co.Ltd(601377) etc; 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 73 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 20, 2022, the China Banking and Insurance Regulatory Commission issued the Interim Measures for off-site supervision of insurance companies, which will be implemented on March 1, 2022. The measures continuously monitor the business operation, continuous guarantee and service to the real economy of insurance companies and assess the risk status by collecting information such as corporate governance, solvency, operation and management and financial data of insurance companies and industries. The measures stipulates that different types of insurance enterprises will separately formulate targeted monitoring indicators and evaluation guidelines, and the evaluation results will be taken as important considerations such as market access and product approval. Failure to submit information as required may be punished. We believe that the measures mainly regulate and clarify the off-site supervision work process and mechanism, and will issue guidelines for supervision, detection and evaluation in the future, which will help to establish and improve the off-site supervision system of insurance companies, clarify the division of responsibilities, standardize the work process, and improve work efficiency.
Listed insurance companies released premium data in December. In terms of life insurance, the annual growth rates of original premiums of Guoshou, Ping An, CPIC, Xinhua and PICC were 1.2%, – 4.0%, 0.6%, 2.5% and 0.7% respectively (the growth rates in the previous November were 1.2%, – 4.0%, – 0.6%, 1.7% and 2.2% respectively). In December, the growth rate of the original premium scale of Guoshou, Ping An, CPIC, Xinhua and PICC was – 0.4%, – 4.5%, 41.9%, 20.4% and – 22.7% (the growth rate in November was – 8.7%, – 8.7%, 5.3%, 4.3% and 89.6%). In addition to PICC, the premium growth rate of various insurance companies has improved, mainly due to the increase in the closing strength of 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 premiums in 2022 will still be weak. In terms of property insurance, the original premiums of Ping An finance, CPIC finance and PICC finance increased by – 5.5%, 4.3% and 3.8% respectively in the first 12 months (they were – 7.3%, 3.9% and 1.6% respectively in the first 11 months). 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%, 9.7% 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. In December, the PICC auto insurance premium was + 10.3% (November was + 9.5%). The comprehensive reform and the new regulations on new energy vehicles will lead to the continued compression of auto insurance underwriting profits, and large insurance enterprises with strong scale effect and pricing advantage 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). However, due to the frequent occurrence of natural disasters and the intensification of performance competition, underwriting profits are 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 of the first quarter may continue to be under pressure. On the asset side, the current real estate policy is strong, which is good for the insurance investment side. In addition, the central economic work conference set the tone to stabilize growth, and the orientation of active fiscal policy and broad monetary policy is clear. It is expected to underpin economic growth. The long-term interest rate under the broad credit expectation superimposed on the expectation of US interest rate increase may usher in an inflection point, driving the valuation repair of insurance stocks. In addition, the increase in the proportion of long-term equity investment capital withdrawn by the second generation of compensation has aroused the concern of the market about the sale of equity assets by insurance companies. We believe that the implementation process will meet the policy requirements in 2025 according to the specific conditions of each company, and the actual impact is lower than the market expectation. The PEV of Guoshou, Ping An, Taibao and Xinhua 2022e corresponding to the current stock price are 0.61x, 0.60x, 0.49x and 0.43x respectively. It is suggested to pay attention to AIA led by high-quality agents and Ping An Insurance (Group) Company Of China Ltd(601318) and China Pacific Insurance (Group) Co.Ltd(601601) with more thorough life insurance reform.
Liquidity view: in terms of volume, the central bank invested 650 billion yuan in the open market this week, including 450 billion yuan in reverse repurchase and 200 billion yuan in MLF. 500 billion yuan of reverse repo 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 13bp to 2.17%, and the inter-bank pledged repo rate decreased by 11bp to 2.17%. R001 down 13bp to 2.14%, R007 up 1bp to 2.35%, dr007 down 10bp to 2.11%. Shibor’s overnight interest rate fell 15bp to 2.06%. The issuing interest rate of interbank certificates of deposit decreased. The yield of one-year treasury bond decreased by 18bp to 2.00%, the yield of 10-year Treasury bond decreased by 7bp to 2.71%, and the term interest margin expanded by 11bp to 0.71%. This week, the bid winning interest rates of MLF and the open market were reduced by 10bp to 2.85% and 2.1%, and the one-year and five-year LPR were reduced by 10bp and 5bp to 3.7% and 4.6% respectively. In addition, monetary policy requires “sufficient force, accurate force and forward force”, adding to the increased importance of steady growth mentioned in the central economic work conference and the gradual severe situation of the recent epidemic, there will still be specific easing measures in the future. In the follow-up, we need to pay attention to the extension of credit and the drag on the bottom of long-term interest rates 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, the decline of China’s economy beyond expectations, the decline of long-term interest rate 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 rate, the pressure of agent shedding, lower than expected insurance sales, the uncertainty of the impact of capital market fluctuations on performance, etc.
