Bank of China International released a report saying that liquidity tightness has been slowing down recently, and bank stocks have performed better than the general trend. However, as the Spring Festival approaches, the direction of monetary policy is tightening, and the deleveraging trend continues. It is expected that there is limited room for liquidity to continue to improve, and there is limited room for valuation repair driven by liquidity itself. The increase in the non-performing rate of Pudong Development Bank in the fourth quarter accelerated, but it should not be a common phenomenon in the industry in the fourth quarter. Looking at the industry as a whole, it is expected that the rate of bad generation in the fourth quarter will continue to stabilize; the month-on-month decline in interest spreads will continue to slow; it is expected that the overall decline in interest spreads in the banking industry will continue to narrow in the fourth quarter, and is expected to stabilize month-on-month. According to the report, in October-November, the decline in the cumulative financial expenses of large-scale industrial enterprises remained stable. The year-on-year decline was 6.5% and 6.3%, respectively, and the decline remained basically stable compared to August-September. The share of financial expenses in cumulative product sales revenue remains around 7.8% and has remained stable since April 2016. There is limited room for valuation repair driven by liquidity itself, but the downward trend in asset quality in '17 continued to slow down. There is great certainty that the profit growth rate has improved slightly. The dividend rate is still attractive, and the value allocated to the industry has increased. Recently, the discount rate of H-share bank stocks has narrowed slightly from more than 10% to 9%. BoBC International expects there is still room for further narrowing in the future. Currently, the PE and PB of the industry in '17 are only 5.51 and 0.71 times, maintaining the industry's leading ratings, maintaining China CITIC Bank (00998-HK) buying ratings, maintaining China Huarong (02799-HK) buying ratings, and maintaining CCB (00939-HK) and Bank of China (03988-HK) long-term buying ratings. In addition, Bank International raised the target price of China Cinda (01359-HK) from HK$2.83 to HK$3.14, and the rating from neutral to long-term buying.