After the beginning of the Year of the Dragon, the banking sector continued to soar. In early trading today, with large capital purchases, the Bank of China and the Agricultural Bank continued to reach new high intraday highs, and Ping An Bank even went up and down. Regarding the rise and fall of the company's stock price, the staff of Ping An Bank's directors' and secretarial office said that the bank had no information that should have been disclosed but not disclosed.
As of the midday close, 42 A-share bank stocks had risen across the board. With large capital purchases, Ping An Bank was still blocked on the rise and fall. Furthermore, Bank of Ningbo and Bank of Qilu both surged by more than 6%. Bank stocks also rose across the board in the Hong Kong stock market, with China Merchants Bank rising more than 6%.
A number of analysts said that some high-quality stocks that have been mistakenly killed may usher in an opportunity for valuations to recover. The valuation repair of high-quality leading stocks is one of the main investment lines in 2024, especially in the Year of the Dragon. The banking sector is a low-wave dividend sector, compounding options with steady growth and risk reduction, and continues to be optimistic about the absolute return of bank stocks.
Major capital flows significantly into the banking sector
According to the Financial Services Association's Star Mining data, the main capital flowing into the banking, food and beverage industry in early trading today was net. As of around 11:00 a.m., the banking sector had a net inflow of more than 1.4 billion yuan. In terms of individual stocks, Ping An Bank surged. Net capital purchases of 687 million yuan ranked first, while Wuliangye, Kweichow Moutai, and China Merchants Bank received the highest net inflows of main capital.
With large capital purchases, Ping An Bank went up and down in the intraday session. By the end of the afternoon session, with large capital purchases, Ping An Bank was still blocked on the trading floor, and the transaction amount reached 4.246 billion yuan in early trading. Regarding the reasons for the rise and fall of the bank's stock price and other related issues, the staff of Ping An Bank's directors' and secretarial office told the Financial Association reporter that the bank had no information that should have been disclosed but “we are also not clear.”
In addition to the rise and fall of Ping An Bank's stock price, which attracted much attention in the market, many major banks continued to hit new high intraday prices today. By the midday close, the Bank of China had risen 1.77%, and the highest intraday price of 4.64 yuan/share reached a new high. The Agricultural Bank rose by 1.2%, and the highest intraday price once again reached a new high.
Also, by the midday close, the banking sector as a whole had risen by more than 3%, with 42 bank stocks flourishing across the board. Bank of Ningbo and Bank of Qilu all surged by more than 6%; China Merchants Bank, Bank of Guiyang, Bank of Ruifeng, and Bank of Chengdu all rose by more than 4%.
In fact, in the two trading days after the Spring Festival (February 19-20), the banking sector has achieved two consecutive gains. On February 20, the central bank announced the February LPR quotation. The 1-year term remained unchanged at 3.45%, and the LPR for the 5-year term or more dropped from 4.2% to 3.95%, a decrease of 25 basis points. Stimulated by news of interest rate cuts, bank stocks rose across the board. In Hong Kong stocks, China Construction Bank's stock price rose 1.48%; Industrial and Commercial Bank rose 1.53%; and Agricultural Bank rose 1.58%, and the stock price also rose to a five-year high. In terms of A-shares, the intraday stock prices of many major banks reached new highs on February 20.
The decline in LPR with a term of 5 years or more exceeds expectations, which is beneficial to bank valuations
“The LPR cut in February was in line with expectations, and the 5-year reduction exceeded market expectations.” CITIC Construction Investment analysts believe that the “1 year no motion+5 year reduction” policy combination is beneficial on the one hand to stimulate improvements on the demand side of real estate and underpin the macroeconomy, and on the other hand, it reflects the policy attitude of caring for bank interest spreads. The negative sentiment in the market has been greatly dispelled, favoring bank valuations and embracing the targets of high-performing banks.
Liang Fengjie, a banking analyst at Zheshang Securities, also believes that the pace of interest rate cuts and the extent of the impact on bank interest spreads is in line with expectations, but the asymmetric interest rate cuts show that regulations are putting more emphasis on steady growth and stable real estate than expected. Therefore, it is emotionally conducive to the restoration of bank stock valuations.
According to Leung Fung-kit, the banking sector is a low-wave dividend sector, compounding options with steady growth and risk reduction. They continue to be optimistic about the absolute returns of bank stocks, and recommend the “big but stable, small beauty pageant” combination. Dai Zhifeng, an analyst at Zhongtai Securities, also believes that the economy determines banks' stock selection logic, that weak and strong economies respond to different target varieties, and that bank stocks have steady and defensive properties.
Liu Chengxiang, an analyst at Open Source Securities, said that the second structural interest rate cut in the year is expected to be implemented by superimposing real estate optimization policies in many places, and a good start in credit is expected to balance “structural optimization” and “volume-price balance” with a high increase in total volume. I am more optimistic about the valuation repair of high-quality regional banks and the allocation logic of undervaluation+high dividend stock banks.
Yang Delong, chief economist of Qianhai Open Source, told the Financial Federation that the A-share market has begun. Trading on the first day of the Dragon Year had a good start, and market confidence has been further effectively boosted. Driven by multiple favorable policy factors, the market trend has gradually reversed, from the previous fluctuating downward trend to gradually fluctuating upward. It is expected that favorable policies will continue to be introduced after the holiday season.
Yang Delong further said that at the beginning of the Lunar New Year, the supervisory authorities held a series of symposiums to fully listen to the voices of all parties in the market, adhere to problem orientation, and carry out targeted reforms and plans on issues that are highly vocal and strongly reflected in the market. It also showed the determination of the Securities Regulatory Commission to maintain market stability, which greatly boosted the subsequent trend of the capital market. Now that the market trend is stabilizing, some high-quality stocks that have been mistakenly killed may usher in an opportunity for valuations to recover. The valuation repair of high-quality leading stocks is a major investment line in 2024, especially in the Year of the Dragon. The Year of the Dragon is likely to fluctuate and recover as valuations of high-quality companies are repaired.
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