Financial Services Association, April 24 (Reporter Gao Ping) The 2024 quarterly report for public funds has been basically disclosed. The first-quarter reports of funds managed by fund managers such as Qiu Dongrong, which have received much attention from the market, have been revealed one after another, and the layout of Star Fund Managers's first-quarter position adjustments has also come to light. Relevant statistics show that at the end of the first quarter, the total market value of banks heavily held by partial equity funds increased by about 0.5 percentage points compared to the beginning of the year, and major state-owned banks increased their holdings a lot.

Recently, the overall performance of bank stocks has been good. In the first quarter, the overall cumulative increase in the banking sector clearly outperformed the Shanghai and Shenzhen 300 Index. Banking brokerage analysts told the Financial Federation reporter that the reflection behind the performance of the banking sector is that in the context of the worsening “asset shortage,” the market's core trading logic for bank stocks has switched from a “pro-cyclical” nature to its “fixed income” defensive nature. Against the backdrop of continued narrowing of interest spreads and a slowdown in scale expansion, banks' revenue capacity may continue to be under pressure, but considering the sector's overall high dividend characteristics and the structural opportunities brought about by the differentiation of individual stock operations, sector allocation value will continue to stand out.

Fund holdings rebounded month-on-month, and major state-owned banks increased their holdings a lot

In the first quarter, public funds increased their holdings in the low-wave dividend sector. According to statistics from Wind and Everbright Securities's financial team, as of the end of the first quarter, partial equity funds held a total of 4.3 billion shares in the banking sector, an increase of 346 million shares from the beginning of the year. The change in shareholding accounted for 0.11% of the free tradable shares of A-share listed banks, ranking 11th among the 30 industry sectors; holding banks had a total market value of 38.9 billion yuan, accounting for 2.46% of the market value of public fund holdings, up 0.51 pct from the beginning of the year, ranking 7th out of 31 industry sectors.

Among them, major state-owned banks have increased their holdings quite a bit. Statistics show that the market value of the positions held by various banks was urban commercial banks, state-owned banks, stock banks, and agricultural commercial banks in order of highest to lowest. Among them, the share of positions held by major state-owned banks increased the most month-on-month, to 0.17%. In addition, the market value of positions held by urban commercial banks, stock banks, and agricultural commercial banks increased by 0.15, 0.14, and 0.05 pct, respectively, compared to the beginning of the year. At the individual stock level, by the end of the first quarter, a total of 32 listed banks had entered the heavy shareholding list, adding Huaxia Bank, Qilu Bank, and Bank of Wuxi.

Wang Yifeng, chief financial analyst at Everbright Securities, said that against the backdrop of increasing “asset shortage” pressure in the capital market and declining market risk appetite, capital still favors sectors with high dividends and low volatility attributes. Recently, bank performance has been strong. Many bank stock prices have reached record highs, and bank stocks have also risen and stopped. According to the data, the cumulative increase in the banking sector in the first quarter clearly outperformed the Shanghai and Shenzhen 300 Index.

“Since the beginning of the year, against the backdrop of increased stock market fluctuations, the banking system controls debt costs, and interest rates in the bond market falling rapidly, the phenomenon of 'asset shortage' in the capital market has become more prominent. As bond market yields declined to an extremely low level in history, the difference between the bank sector dividend rate and 10y treasury bond yield rose to the highest level in history of around 300 bp. Bank stocks continued to strengthen during this period, with a cumulative increase of 10.8% in the first quarter, outperforming the Shanghai and Shenzhen 300 Index by 7.7 pcts.” Wang Yifeng made a specific statement.

Fund managers such as Qiu Dongrong increase their bank stock positions suggest continuing to pay attention to the dividend value of the sector

A Financial Services Association reporter discovered that a number of star fund managers in managing funds increased their bank stock holdings in the first quarter. For example, Qiu Dongrong, a well-known fund manager under the Zhonggeng Fund, managed the fund Zhonggeng Value flexibly and flexibly allocated hybrid funds and increased his holdings in Bank of Ningbo in the first quarter. According to the data, at the end of the first quarter, the fund held 6.46 million shares of the Bank of Ningbo, the largest stock; at the end of 2023, it held 5.268,000 shares, making it the fifth most heavily held stock.

“Overall, against the backdrop of continued narrowing of interest spreads and a slowdown in scale expansion, banks' revenue capacity may continue to be under pressure, but considering the overall high dividend characteristics of the sector and the structural opportunities brought about by the fragmentation of individual stock operations, the sector allocation value will continue to stand out.” Yuan Zheqi, an analyst at Ping An Securities, said.

In terms of future market investment, some fund managers adhere to undervalued value investment strategies, build investment portfolios with high expected returns by selecting individual stocks with good fundamentals, positive profit growth, and undervalued value, and use the banking sector as one of the key investment directions. Qiu Dongrong said in the first quarterly report of the Zhonggeng Value Flexible Allocation Hybrid Fund that the investment direction the fund focuses on includes value stocks with high growth or profit elasticity. The main industries include real estate, banking, etc.

Qiu Dongrong believes that the valuation pricing of banks in the financial sector is extremely suppressed by long-term factors. In particular, banks with the best historical fundamentals in the sector have lower valuations than absolute positions, making it easier to choose. The banking business is similar but the competitiveness is different. The competitive advantage of excellent banks is specific and continuous. They obtain more agreed operating results from detailed capabilities such as customer service, deposit acquisition, accurate pricing, and risk management, resulting in resilient asset quality and strong endogenous growth, and good return potential.

From the perspective of bank stock investment, many brokerage analysts continue to suggest focusing on the allocation value of the banking sector as a high dividend target. According to the data, as of April 23, the average dividend rates of A-share and H-share listed banks were 5.1% and 7.2% respectively, and the yield differences with 10y treasury bonds were 287 bps and 497 bps, respectively, which is far higher than the historical average.

Wang Yifeng said that in a context where economic growth is still uncertain and the “asset shortage” phenomenon in the capital market is intensifying, “stable profits, low valuation, and high dividends” fixed income assets represented by banks highlight investment cost performance. In particular, for insurance funds that value “debt value” and where asset-side arrears are serious, the willingness to allocate such assets has increased significantly, and he continues to be optimistic about the allocation value of fixed income attributes in the banking sector.