As the saying goes, buying stocks is buying a company, sharing the company's profits and growing together with the company.

In the case of decreasing market risk appetite, banks and insurance stocks have become the preferred high dividend investment, driving their stock prices to continue rising throughout the year. After the high increase, whether bank and insurance dividends are still worth investing in and whether there is still room for stock price to rise has become the focus of the market.

Yesterday, the central bank and other three departments announced a "policy gift package," which dispelled the market's concerns about banks with a single blow, while boosting the investment and asset side of insurance companies, further supporting the high-dividend investment logic of banks and insurance companies.

From a macro perspective, the Federal Reserve cut interest rates by 50 basis points, followed by the Hong Kong Monetary Authority announcing a 50 basis point cut as well, bringing liquidity to the Hong Kong stock market and driving the overall rise in the Hong Kong stock market.

Under the dual logic support of "rate cut" and "high dividends", since September 10, Hong Kong bank and insurance stocks have seen consecutive increases, with dividend yield still remaining attractive.

For example,$CM BANK (03968.HK)$ With a recent 10-day increase of 17.67%, after continuous days of gains, the dividend yield still remains above 6%.$PING AN (02318.HK)$The increase over the past 10 days reached 16.12%, with a dividend yield of over 6%, and even more $BANKCOMM (03328.HK)$Please use your Futubull account to access the feature.$CCB (00939.HK)$Please use your Futubull account to access the feature.$BANK OF CHINA (03988.HK)$Please use your Futubull account to access the feature.$CITIC BANK (00998.HK)$ The dividend yield is at a level of 7%.

Central bank's combination of measures dispels market concerns about banks.

Before the central bank released significant policies yesterday, the market was worried that the "downward adjustment of existing home loan interest rates" would reduce the interest income banks receive from mortgage loans. If the deposit interest rate remains unchanged, then the bank's costs haven't decreased, leading to a narrowing of net interest margins, hurting the bank's profits.

But this concern was "relieved" by the series of measures introduced by the central bank.

Firstly, the central bank announced a reduction in the reserve requirement ratio by 0.5 percentage points, further reducing it by 0.25-0.5 percentage points depending on market liquidity conditions during the year; lowering the policy rate, with the 7-day reverse repurchase rate cut by 0.2 percentage points, guiding loan market quoted rates to move downwards in sync with deposit rates.

As a result, banks' funding costs from the central bank decreased, maintaining stability in banks' net interest margins, and the market concerns about the impact of "lowering existing home loan rates" on bank profits dissipated.

In addition, the central bank collaborated with the China Banking and Insurance Regulatory Commission to strengthen the core Tier 1 capital of six large commercial banks, implementing in an orderly manner following the approach of "overall coordination, phased implementation, and customized policies for each bank."

Zong Liang, chief researcher of Bank of China, believes that increasing the core Tier 1 capital of six large commercial banks is to maintain the stability of the banking industry, enhance the competitiveness of state-owned major banks, and lay a solid foundation for the next step of loan issuance and financial system stability.

From the perspective of the necessity of capital replenishment, Zong Liang believes that the profit growth rate of the six major banks has slowed down in recent years. It is still necessary to maintain a reasonable loan growth rate and their own stability, so the capital level is under certain pressure, but still maintained at a normal level. With limited internal and external capital replenishment, taking special measures to replenish capital for the six major banks is a significant move. As for the next steps, further refinement and observation are needed.

JPMorgan pointed out that among state-owned banks,$PSBC (01658.HK)$,$BANKCOMM (03328.HK)$And.$ABC (01288.HK)$Insufficient capital, the buffer of Tier 1 capital adequacy ratio in the first half of 2024 is only 128/180/213 basis points, while $ICBC (01398.HK)$ and $CCB (00939.HK)$ no injection is needed.

Under the influence of the above policies, bank stocks are boosted. By the close on the 25th, the stock prices of large state-owned banks remain strong.

With 500 billion 'cyclical bullets' and long-term assessments, will insurance funds have to 'tread carefully with both feet' to succeed?

Insurance funds have the characteristics of large scale, stable sources, and long duration, making them a natural long-term source of capital for the stock market. Historically, insurance funds have been considered as the 'ballast' for the long-term stable and healthy development of the capital markets, playing roles as economic shock absorbers and social stabilizers. Therefore, the logic behind investing in insurance companies is to share the profits generated from investing in these insurance companies.

According to Wind data, as of the end of the second quarter of 2024, a total of 796 A-share listed companies had the top ten largest shareholders of insurance funds, with a total holding of 89.2 billion shares and a total market value of 1.22 trillion yuan. According to incomplete statistics, 12 A-share or H-share listed companies have been acquired by insurance funds during the year, with the frequency of acquisitions increasing from 9 times the previous year to the highest in nearly four years.

Under the weak trend of the Hong Kong large cap market in the past three years, insurance companies' investment returns have been affected. For example, $PING AN (02318.HK)$ The financial report for the first quarter of 2024 shows a net income attributable to the parent company of 26.063 billion yuan, a significant year-on-year decrease of 42.7%. This is partly due to the volatility of the equity market and the downward pressure on investment returns due to interest rate declines, as well as the high base number in the same period last year.

However, the 'signal' released by yesterday's 'big gift' policy is extremely beneficial to the insurance industry.

Firstly, the People's Bank of China proposed an innovative monetary policy tool for the first time - the swap facility, allowing eligible securities, funds, and insurance companies to use their holdings of bonds, stock ETFs, and CSI 300 index component stocks as collateral to exchange for high-liquidity assets such as national bonds and central bank bills.

Secondly, the funds obtained through the swap facility can only be used for investing in the stock market, with an initial operation scale of 500 billion yuan, which may be expanded in the future depending on the situation, effectively injecting liquidity into the stock market.

This policy has promoted the insurance industry's support for the capital markets. Insurance funds can buy stocks, obtain funds through the swap facility, and reinvest in the stock market. In the short term, this incremental capital can help restore the prices of some high-quality listed companies, thereby improving the overall market valuation.

In addition, the country has provided strong support for insurance funds to be patient capital.

The China Securities Regulatory Commission and relevant departments have formulated the "Guiding Opinions on Promoting the Entry of Medium- to Long-Term Funds into the Market", which will be issued recently. How to improve the regulatory inclusiveness of investments in medium- to long-term fund equities, as well as how to fully implement assessments lasting more than three years, has attracted widespread attention from insurance investment professionals.

On the other hand, the China Banking and Insurance Regulatory Commission announced that Li Yunze will expand the pilot reform of long-term investment of insurance funds, support other eligible insurance institutions to establish private equity investment funds, further increase investment in the capital markets, while urging and guiding insurance companies to optimize assessment mechanisms, and encourage and guide insurance funds to engage in long-term equity investments.

In the long run, on one hand, the long-term entry of insurance funds into the market is conducive to supporting the sustained and healthy development of the Chinese stock market; on the other hand, if the large cap can continue to rise in the long term, insurance companies with a "heavy position" in Chinese stocks are also expected to see valuation rebound, generating continuous returns for shareholders.

Editor/Rocky