Financial Services Association, January 24 (Reporter Cao Yunyi) Recently, several banks announced measures to stabilize stock prices. Previously, bank stock prices quickly broke down after listing, passively triggering stock price stabilization measures. However, since this year, under volatile market conditions, high-dividend-related industries have continued to be favored by capital due to stable cash flow and dividend advantages. The A-share banking sector has performed well and received active capital from various sources to increase its holdings.

After the beginning of the year, Northbound Capital reversed its previous attitude of drastically reducing holdings and increased its holdings in the high-dividend sector against the market. The banking sector received an increase in capital holdings from various sources due to its “safe haven” and high dividend attributes. The industry told the Financial Federation reporter that the banking sector, which has undervalued values, high dividends, and relatively stable profits, has attracted market attention and has become a strategic choice for institutions to cross the capital cycle. In the short term, considering certain macroeconomic uncertainties, holding an investment portfolio composed of stocks with high dividend rates is the first strategic choice.

Shareholders take steps to increase their holdings and stabilize stock prices

Bank stock performance was sluggish last year, and a number of banks announced shareholders' actions to protect the market at the beginning of the year.

The Shanghai Agricultural Commercial Bank disclosed that from December 14, 2023 to January 22, 2024, Guosheng Asset used its own capital to increase its holdings of the company's shares by 4.2 million shares through centralized bidding through the Shanghai Stock Exchange trading system, accounting for 0.044% of the total share capital. The cumulative increase in holdings was about 244.57 million yuan. In addition, Zhejiang Shanghai-Hangzhou-Ningbo increased its total holdings of the company's shares by 3.816,300 shares with its own capital, accounting for 0.04% of the company's total share capital, and the cumulative increase in holdings was about 24.00 million yuan.

Guosheng Assets and Zhejiang Shanghai/Hangzhou-Ningbo were all shareholders of the Shanghai Agricultural Commercial Bank holding more than 5% of the shares before the initial listing. Together, the two increased their holdings by about 484.57 million yuan. The increase in the holdings of the two major shareholders is related to the poor stock price performance of the Shanghai Agricultural Commercial Bank last year. In December of last year, the Shanghai Agricultural Commercial Bank announced the “Stock Price Stabilization Plan”. The three shareholders of Shanghai Jiushi Group, Guosheng Assets, and Zhejiang Shanghai-Hangzhou-Ningbo will increase their holdings to stabilize the stock price. The amount of increase in holdings will not be less than 38.2066 million yuan, 244.18,900 yuan, and 243.1887 million yuan, respectively. Currently, Guosheng Asset has implemented the obligation to stabilize stock prices.

Since the beginning of the year, the Shanghai Agricultural Commercial Bank's stock price performance has been impressive. As of January 24, the Shanghai Agricultural Commercial Bank reported 6.26 yuan/share, up 0.97%. The data shows that since the beginning of the year, the Shanghai Agricultural Commercial Bank ranked first among A-share listed banks with a cumulative increase of over 8%.

Qilu Bank's measures to stabilize stock prices have also recently been completed. The bank disclosed that the entity concerned used its own funds to increase its holdings by 14.168,900 shares, accounting for 0.30% of the bank's total share capital through centralized bidding or through the Shanghai Stock Connect. The cumulative increase in holdings was about $56.318 million. The transaction price range was 381 yuan to 4.21 yuan per share.

“Bank shareholders and others increase their holdings to help stabilize market sentiment. As the market becomes more optimistic about the prospects for economic recovery, the banking sector's stable fundamentals and low valuations are expected to resonate with favorable shareholders' and executives' increased holdings, which will help boost market confidence and stabilize stock prices.” Zhou Maohua, a macro analyst at the Financial Markets Department of Everbright Bank, told the Financial Association reporter.

High dividends from bank stocks received increased holdings from various sources

Since the beginning of 2024, there has been a net outflow of capital to the north, but bank stocks have bucked the trend due to their high dividends. According to the Everbright Securities Research Report, as of January 19, there was a cumulative net outflow of capital to the north of 31.4 billion yuan in A-shares. At the same time, some high-dividend industries had reverse market holdings. Coal, banking, transportation, etc. had the highest share increase in holdings. It is worth noting that this is different from the attitude of drastically reducing the holdings of Northbound Capital a few years ago. In the fourth quarter of 2023, Northbound Capital reduced its holdings of 1.38 billion shares in the banking sector, but the attitude of Northbound Capital changed after 2024. In terms of individual stocks, Northbound Capital mainly bought ICBC, CCB, Agricultural Bank, etc.

Furthermore, after listing the shares of the Bank of Wuxi in the secondary market, Great Wall Life continued to further increase its shareholding ratio through convertible debt-for-equity swaps; Minsheng Life transferred 10.96% of the shares in the online merchant bank. The insurance funds are large and the holding period is long. Holding bank shares is also due to various considerations, including the appeal of high dividends on bank stocks. Industry insiders said that the equity market and bond conversion market have been generally weak since 2023. Against this backdrop, the banking sector with low valuations, high dividends, and relatively stable profits has attracted market attention and has become a strategic choice for institutions to cross the capital cycle.

In fact, bank stocks continued to show an upward trend this week in the face of shocks. According to Wind data calculations, as of today's close, the banking sector's average dividend rate in the past 12 months was over 5%. As of January 24, the banking sector index had accumulated a cumulative increase of 3.11%, while the Shanghai and Shenzhen 300 fell 4.49% during the same period.

Wang Zonghao, head of stock strategy research at UBS China, also told the Financial Association reporter that he will continue to pay attention to high-dividend yield stocks in the short term. “In the short term, given some macro-uncertainty, our strategy is to hold a portfolio of high-dividend stocks that will benefit from insurance capital and potential capital inflows from the national team.”

Wu Xuan, a senior market analyst, told the Financial Association reporter that the strengthening of the banking sector is mainly due to rising risk aversion in the market. As a representative of high dividends and undervaluation, the banking sector often becomes the first choice for safe-haven funds when the market is extremely weak, thus showing good resistance to falling. “Although from a phased perspective, there is a suspicion that high-dividend assets are overvalued, if you look at the time period for high-dividend assets, it is far from the stage where risk control is needed.”

Wang Yifeng of Everbright Securities believes that the bank stock market will continue further before the holiday season, and the high dividend strategy will continue to prevail. Furthermore, as medium- to long-term capital such as insurance capital enters the market and increases allocation, the banking sector is expected to further generate significant excess profits and continue to be optimistic about the banking sector's pre-holiday stock price performance.