First, for a long time, the market has been quite controversial about the quality of banks' assets, and the rise in stock prices related to this industry is also viewed as an act of trusteeship. However, just now, news broke that J.P. Morgan Chase raised the ratings of Industrial Bank and SPD Bank, which are listed on A-shares, from low to neutral due to improved revenue and profit prospects.
Second, most A-share broad-based indices regularly adjust their constituent stocks in June and December every year. According to CICC's forecast, bank constituent stocks in the Shanghai Securities 50 Index may increase. If arbitrage funds enter the market early, it may provide some support to the market.
Third, on the first day of the May 1st Golden Week holiday, railways across the country sent 20.69 million passengers, a record single-day high. In addition to this, the car rental industry also recorded strong performance during Golden Week, and travel data was even more impressive.
Fourth, after the high-level meeting, Hong Kong stocks ushered in their first trading day. Although the periphery generally declined, Hong Kong stocks performed very well in early trading today. As of midday trading, the Hang Seng Technology Index surged by more than 4%, while the Hang Seng Index and the State-owned Enterprises Index also pulled more than 2%. The A50 also had a strong performance in early trading today. This means that the market's optimistic expectations are beginning to unleash.
Benefits of bank stocks
This morning, an unexpected benefit came suddenly: J.P. Morgan Chase raised the ratings of Industrial Bank and SPD Bank, which are listed on A-shares, from low to neutral due to improved revenue and profit prospects.
J.P. Morgan Chase said in the report that it is expected that the stabilization of the core revenue trend of Industrial Bank will lead to more visible earnings per share and dividend growth; it is expected that SPD Bank will decline in future non-performing loan slippage rates and impairment preparations, and profit growth will be more stable than in previous years. The target price of Industrial Bank was raised to 16.10 yuan; SPD Bank's target price was raised to 8 yuan.
Last year, Pudong's performance can only be said to be in line with expectations. SPD Bank's 2023 revenue/net profit decreased by 8.1% and 28.3%, respectively. The revenue/net profit to mother for the fourth quarter of last year decreased by 9.6% and 18.6%, respectively. But the first quarter of this year can be described as “amazing.” Revenue for the first quarter decreased by 5.7% year on year, and net profit to mother increased 10.0% year over year. After excluding the one-time impact of the sale of shares invested in Morgan during the same period of the year, 1Q24 revenue increased 3.4% year over year, and net profit after deducting non-return net profit increased by 30.6% year on year. Industrial Bank achieved revenue of 57.751 billion yuan in the first quarter, +4.22% year on year. The growth rate increased by 9.42 PCT compared to 2023; net profit to mother was 24.336 billion yuan, -3.10% year over year, but the growth rate increased by 12.51 PCT compared to 23.
Guangfa Securities believes that looking at the full year of 2024, since concession policies such as stock mortgage interest rate cuts and insurance fund fee cuts began in mid-2023, the revenue growth rate was high and low last year, and the bank's revenue growth base was high and bottom. As the results of the reduction in deposit interest rates became apparent, the revenue growth rate is expected to rise steadily in the next few quarters. The profit growth rate of various banks will also continue to converge to the revenue growth rate. The differences in the relative trends in the performance of various banks are mainly due to differences in asset quality disclosure and return delivery in the bond market.
In addition to fundamentals, banks have another potential benefit. Most A-share broad-based indices regularly adjust constituent stocks in June and December every year. According to CICC's forecast, bank constituent stocks in the SSE 50 Index may increase, and it is expected that 5 stocks including Bank of Communications may be included in the SSE 50 Index.
Revealing vitality
Looking at the macro level, the economic data for the May Day holiday already showed some signs of optimism.
On the first day of the long vacation, big positive data came out. According to CCTV news reports, on May 1, railways across the country sent 20.69 million passengers, a record single-day high.
In addition, the car rental industry also recorded strong performance during Golden Week. Among car rental orders this year, the preordered models were mainly sports utility vehicles (SUVs) and commercial vehicles, and the share of new energy models also recorded a significant increase. In addition to the cost advantage, many consumers want to experience new models by renting a car during the holidays.
According to reports, car rental platform data shows that the majority of “post-90s” young people rent new energy models for self-driving tours. Among them, car rental orders in cities such as Xining, Urumqi, Yinchuan, Lanzhou, Qingdao, Nanjing, and Shanghai are growing rapidly.
Judging from travel data, data from various platforms shows that on the first day of the holiday, cultural attractions in the ancient town received the attention of tourists, and the popularity of tourist searches such as Wuzhen, Nanxun Ancient Town, and Xitang Ancient Town increased by more than 200%. According to Tongcheng travel data, the popularity of inbound air ticket bookings from abroad to mainland Chinese cities also rose sharply on May 1, nearly doubling from the previous year. Among them, inbound air ticket reservations are popular in cities such as Seoul, Singapore, Tokyo, Osaka, and Moscow.
Hong Kong stocks soared
The stock market also had a very positive reaction. Against the backdrop of weakening peripheral markets, Hong Kong stocks continued to strengthen in early trading today. As of midday trading, the Hang Seng Technology Index had increased to 4%, the Hang Seng Index had risen more than 2%, Shangtang had risen nearly 28%, NIO had risen more than 21%, and Meituan had risen more than 8%.
Notably, today's rise occurred against the backdrop of no capital going south. This may mean that foreign investment may actually be back. Judging from A50's performance, Hong Kong stocks also showed strong performance today, driven by Hong Kong stocks. Obviously, favorable data has not only warmed the entire market.
Judging from the market structure, since electric vehicle manufacturers have generally announced their April results recently, they have all performed quite well. As a result, stock prices generally improved this morning, and NIO surged 20%. According to a report published by Morgan Stanley, NIO's sales volume surged 135% year-on-year (32% month-on-month increase), and weekly orders showed a meaningful increase, or were driven by price cuts. The market will focus on its upcoming mass market (Onvo) brand. The market expects the company to launch in the third quarter of this year. This should be a sales driver and a product that determines whether it can balance its balance.
It is worth mentioning that on the last trading day before the holiday, a high-level meeting was held to clarify the dates of the major meetings, and the conference also sent out positive policy signals. After a day of informatization, the market clearly picked up positive signals from this conference. SPDB International believes that the current valuation of the Chinese market is still low. The forward-looking price-earnings ratios of the Shanghai Composite Index and the Hang Seng Index are 11 times/9 times respectively, both lower than the average for the past 5 years. After the April high-level meeting, if corresponding support policies continue to be implemented, it will help to continue to boost market sentiment, and the market is expected to recover steadily.
editor/tolk