Oct 14th, Caifinance News (Editor Fang Yi), with the short-term stability of Hong Kong stocks, the market's risk preference is returning to rationality, today's China mainland banking sector in Hong Kong stocks once again attracted attention from funds, leading in the increase.

As of the time of publication, $ICBC (01398.HK)$N/A.$ABC (01288.HK)$Up more than 3%, $CCB (00939.HK)$,$CM BANK (03968.HK)$Please use your Futubull account to access the feature.$BANK OF CHINA (03988.HK)$Hua Hong Semi rose more than 2%.

On October 12, Minister of Finance Lou Jiwei stated at the State Council Information Office press conference that the Ministry of Finance will issue special national bonds to support large state-owned commercial banks in supplementing their core Tier 1 capital, enhancing their risk resistance and credit extension capabilities, and better serving the development of the real economy.

According to the research report of CITIC Securities, the intensification of countercyclical adjustment in fiscal policy helps alleviate the credit risks of two important sectors in the banking system (municipal investment and real estate sectors), which contributes to enhancing the stability of banks' net assets, positively affects the valuation of bank stocks, and further increases the certainty of the sector.

It is worth noting that the last similar policy experience can be traced back to 1998 when facing the impact of the Asian financial crisis, the Ministry of Finance issued targeted special national bonds of 270 billion yuan to the four major banks. Currently, the market expects that this round of capital injection will exceed the level of 1998, possibly reaching a trillion level in scale.

According to China International Capital Corporation's calculations, under certain assumptions, if the core Tier 1 adequacy ratio of the six major banks is raised by 0.5 percentage points, 1 percentage point, 2 percentage points, it implies the need for capital injection to relieve bank capital pressure for 2 years, 5 years, and 10 years, requiring capital injections of around 0.5 trillion yuan, 1.1 trillion yuan, and 2.1 trillion yuan respectively.

Interestingly, following the capital injection in 1998,$SSE Composite Index (000001.SH)$and$Hang Seng Index (800000.HK)$both experienced a subsequent uptrend in 1999. Market data shows that in the full year of 1999, the SSE Composite Index and Hang Seng Index cumulatively rose by 19.18% and 68.80% respectively.

Additionally, analysts Qu Jun and Yu Bowen from Orient pointed out in their report on October 14 that the market is expected to develop along the path of improving asset quality first and then expanding balance sheet space. Considering the certainty of policies and the anticipated short-term implementation, small and medium-sized banks with potential logic of convertible bond issuance are expected to undergo a round of valuation restoration.

As of the first half of 2024, banks with a relatively high proportion of leasing and commercial service loans include Nanjing and Chengdu, while banks with a higher proportion of broad infrastructure loans include Chengdu, Nanjing, Hangzhou, Chongqing, and Yunong.

Today, under the background of the overall strength of china mainland banking, many small and medium-sized city commercial banks also show market elasticity, with relatively active trends.

Orient believes that in the recent period, entering the intensive implementation period of stable growth policies, loose mmf comes first, followed closely by loose fiscal policy. The intensity and pace of localized debt are expected to exceed expectations, bullish on the banks in the fourth quarter to once again achieve excess returns. Furthermore, capital injection has positive significance for enhancing the risk resistance capability of state-owned major banks and better supporting the real economy.

Editor / jayden