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1、BankingLiquidity may rebound in the near term Please read the disclaimer at the end of the report Overweight Sustain Banking Liquidity may rebound in the near term Sector Performance ? Liquidity expectations: the core rationale behind investment in bank shares. As macroeconomic conditions have been
2、lukewarm, investors didnt hold much difference in this regard, which has been priced in banks share performance to some extent. The divergence of viewpoint rely on liquidity: whether liquidity would be further injected into the system to ensure economic growth; or liquidity would be withdrawn in sup
3、port of economic restructuring? In the short run, the regulators attitude towards the supervision of “non-standard” assets will have the greatest impact on liquidity expectations and it will be particularly critical for short-term performance of banking shares. First, it will reflect top policymaker
4、s attitude towards liquidity and economic growth; second, it would affect banks fundamentals, thus having a double impact on banking stocks. ? Will supervision of ;non-standard; assets become more stringent? This proposition may be difficult to ;falsify; in the short term. Investors holding the 6vie
5、w that regulatory policies wont be further tightened will actively invest in bank shares for their undemanding valuations. By comparison, those foreseeing tighter regulatory policy will remain cautious. Before the proposition is proven, these two market forces will dictate volatilities of bank share
6、s. ? We tend to expect increasingly tighter regulatory policies. While the market may have different voices, our view is based on the following factors. 1) The whole banking industry is actively pursuing “innovations; centering on ;non-standard; assets, rather than one or two banks. Absent tighter s
7、upervision, non-standard assets would continue experience rapid growth. 2) Risks tied to the ;non-standard; assets will eventually be borne by banks and systemic risks have been building up, a fact the regulator do not want to see. 3) Without tighter oversight, economic restructuring will become mor
8、e challenging. As the motivation behind banks preference of non-standard assets is to shun away from regulatory oversight, relevant funds are bound to flow into areas the government wants to keep in check. ? Banks non-standard assets have been ;precisely; invested to property, thus boosting housing
9、prices. 1) Banks have already become very “skilled” in converting “average loans; into non-standard assets since 4Q12. Such a business has seen large-scale development, with relevant funding concentrated in real estate and infrastructure (estimated at above 70%). 2) correspondingly, price movements
10、are essentially a monetary phenomenon. As monetary and credit resources are “precisely” invested into the housing sector through banks innovation, property developers funding pressures have significantly eased since 4Q12. Funds available to property developers have risen sharply, with the YoY growth
11、 rate reaching 34% in Jan-Feb 13. Housing prices rise as well. 3) If housing prices are subject to continued upward pressures, supervision of non-standard assets could be even tighter. ? Views on the sector: (1) A review of our earlier view on the sector: The best environment for the banking sector
12、is a thing of the past. “Expectations of an economic recovery + liquidity easing” combined would create the optimal climate for banking stocks. Nonetheless, either economic conditions or liquidity will (at least one) change going forward. Nonetheless, the sector is still worthy of investment. (2) Ou
13、r view following the introduction of the new rules: Await patiently. We do not recommend investors to bet on a rebound in the short term. As long as the economy will not see hard-landing, the banking sector is undoubtedly worth investment: by firmly holding at the valuation bottom of 1x PB, we expec
14、t to gain a 10% or more return in 2013. ? Stock picks: ICBC (601398) and China Merchants Bank (600036) for the short-term, China Minsheng Banking Corp (600016) the longer-term. We prefer to pick defensive stocks for now: 1) China Merchants Bank(600036)s premium narrowed. Changes in the regulatory en
15、vironment highlight its comparative advantage. Following the latest regulatory measures targeting wealth management products, we start to recommend this name and include it into our recommended portfolio. We predict that it will maintain relative strength in the near term. 2) By comparison, ICBCs(60
16、1398) annual report is the best among the five major banks (This play has comprehensive and solid operations and cheap valuation); 3) In the longer-term, China Minsheng Bank(600016) is still our key pick due to its robust business edge and sustained improvement in its fundamentals. ? Risk reminder:
17、macroeconomic conditions and regulatory policies Source: Haitong Research Dai Zhifeng Chief Banking Analyst SAC: S0850512050002 Tel: 0755-23617160 Email: dzf8134htsec4 Liu Rui Banking Analyst SAC: S0850512050001 Tel: 021-23219635 Email: lr6185htsec SSeeccttoorr RReeppoorrtt 8 April 2013 Research Rep
18、ort Banking sector Banks (LHS) Haitong Composite Index (RHS) anonymousanonymous FIRST LAST 04/09/13 01:17:15 PM Hong Kong Highpower Sector Report Banking Please read the disclaimer at the end of the report 2 1. The banking sectors weekly market performance Bank shares recorded a 0.16% decline last w
19、eek, compared with all A-shares loss of 1.51%. Meanwhile, the SZSE SME index and the GEM index declined 2.14% and 2.72%, respectively. The banking sector outperformed the market last week. Chinas top five lenders, China Merchants Bank(600036), Ping An Bank(000001), and China Mingsheng Bank(600016) o
20、utperformed CITIC Bank(601998)and China Everbright Bank (601818). State-owned banks, joint-stock lenders and city commercial banks logged gains of 1.03%, -1% and 0.11%, respectively. In terms of valuation, the sector traded at a forward PE of 6.37x and forward PB of 1.19x in 2012. As regulatory effo
21、rts are set to get increasingly stringent in the near term, bank shares will unlikely seen an upbeat trend. Market participants may shift towards extreme expectations, anticipating a worrisome combination of ;tighter supervision + weaker economic growth;. However, if the time horizon is extended to
22、more than a quarter, we predict that policymakers will make the right decisions timely, without going to the extreme. As long as the economy is free from big woes, the banking sector is undoubtedly worth allocating: by firmly holding at the valuation bottom of 1x PB, full-year returns of 10% or more
23、 are guaranteed, which means that banking stocks are still of value in terms of assets allocation. 2. Liquidity tracking in interbank market The PBOC posted net liquidity withdrawal of RMB25bn as market liquidity remained accommodative The central bank offered repos worth of RMB30bn last week. As RM
24、B5bn worth of repos also matured in the week, net liquidity withdrawal by the central bank reached RMB25bn. As supply of funds remained ample, lending rates were still steady. Overnight repo rate dropped 63 bps to 2.08% last week whereas 7-day repo rate rose 20 bps to 3.24%. The divergence between t
25、he movements of overnight repo rate and 7-day repo rate was mainly attributed to a notable decline in interest rate on the short end on the back of as end-quarter effects leveled off. Bill discount rates in Pearl River Delta and Yangtze River Delta came in at 4.05% and 4% last week, respectively, un
26、changed from the previous week. Fig.1 Interbank repo rates 0123456789102011-012011-032011-052011-072011-092011-112012-012012-032012-052012-072012-092012-112013-012013-03隔夜（%） 七天（%） Source: WIND, Haitong Research Fig. 2 Bill discount rates 024681012142011-012011-032011-052011-072011-092011-112012-012012-032012-052012-072012-092012-112013-012013-03珠三角（%） 长三角（%） Source: WIND, Haitong Research Overnight (%) 7-day (%) Pearl River Delta (%) Yangtze River Delta (%) anonymousanonymous FIRST LAST 04/09/13 01:17:15 PM Hong Kong Highpower