The proportion of actively held bank stocks in the third quarter of 2024 rose slightly from the bottom, with the position ratio still at a low level, but the degree of underweighting narrowed as stock prices rebounded, and market risk preference increased slightly.
According to the Securities Times APP, Huachuang Securities released a research report stating that the proportion of actively held bank stocks by public funds in the third quarter of 2024 slightly increased from the bottom, with the position ratio still at a low level. However, as stock prices rebounded, the degree of underweighting narrowed, and market risk preference increased slightly. At present, the absolute return space of the sector is still bullish, and the investment value of pro-cyclical bank stocks relative return is bullish as well. Against the backdrop of two heavyweight meetings held intensively at the end of September, policies are more positive in setting the tone for the economy, and subsequent corresponding policies will speed up implementation, leading to a more optimistic outlook and confidence in the economy. If this round of policies can effectively promote the recovery of real estate and consumption, there is bullish view on pro-cyclical strategy space and opportunities.
Huachuang Securities' main views are as follows:
The passive allocation of bank stocks in the third quarter of 2024 increased, while actively managed fund holdings remained at a low level, indicating a slight recovery in market preference.
1) Stock price increases drive the rise of bank holdings market value: From the perspective of holdings market value, the holdings market value of the top ten heavy stock positions of active public funds in the third quarter of 2024 increased by 9.1% to 1.62 trillion compared to the second quarter of 2024, with the market value of bank stock holdings at 45.2 billion yuan, an increase of 10% compared to the previous period. In terms of holdings ratio, the percentage of bank stock holdings increased by only 2 basis points to 2.79% compared to the previous period, ranking 12th among the 31 Shenwan first-level industries. The increase in market value of bank stock holdings is mainly driven by stock price increases, with actively managed fund holdings of bank stocks still at a low level.
2) Market risk preference is showing some recovery: Looking at changes in positions, industries such as non-banking finance, real estate, household appliances, and autos saw significant increases in their holding proportions. Under the stimulus of expansionary policies, market risk preference has slightly increased. The top five industries with increased holdings are electrical equipment (+2.25pct), non-banking finance (+1.00pct), real estate (+0.63pct), household appliances (+0.6pct), and autos (+0.59pct); the top five industries with reduced holdings are utilities (-1.25pct), electronics (-0.75pct), nonferrous metals (-0.67pct), petroleum and petrochemicals (-0.45pct), and machinery equipment (-0.45pct).
With stable real estate and reduced local government debt risks, commercial banks and high-quality city commercial banks received more increased allocations.
State-owned banks/commercial banks/city commercial banks/rural commercial banks' fund holdings proportions changed by -1bp/+4bp/+1bp/-2bp to 0.86%/0.71%/1.06%/0.17% respectively. In terms of individual stocks, the holdings proportions of Bank of China, CM Bank, Bank of Ningbo, Bank of Jiangsu all saw significant increases, with 3Q24 holdings proportions changing by +6bp/+3bp/+5bp/+8bp to 0.1%/0.64%/0.31%/0.21%. As the economy gradually recovers, on one hand, high-dividend stocks still remain attractive, on the other hand, the market's confidence in quality growth-oriented bank stocks is gradually being restored.
Bank stocks holdings remain underweight, especially the state-owned banks having the largest underweight deviation.
Fund holdings of bank stocks deviated from benchmark narrowed by 0.65 percentage points to -8.51% in 3Q24, still the most underweight sector among 31 sectors. Part of the reason is passive funds continuing to increase holdings in the bank sector, with 3Q24 index funds increasing their total holdings and total market cap of bank sector by 15%, 33.7% compared to 2Q24 to 6.66 billion shares, 97.8 billion yuan; 3Q24 ETF funds increasing their total holdings and total market cap of bank sector by 17.9%, 36.6% compared to 2Q24 to 5.51 billion shares, 84.6 billion yuan.
Looking at different types of banks, state-owned banks with larger market caps remain the most underweighted sector, mainly due to passive funds increasing holdings in Agricultural Bank and Industrial and Commercial Bank in the third quarter. In terms of month-on-month changes, the underweight deviations for different types of banks all expanded, with state-owned banks/commercial banks/city commercial banks/rural commercial banks' underweight deviations changing by -89bp/-63bp/-103bp/-21bp to -7.09%/-3.31%/-1.40%/-0.33% (total individual stock underweight deviation).
Recommendation on investment style: Focus on two main lines - long-term selection of business models, embrace core assets at the bottom. Suggest paying attention to CM Bank (600036.SH), Bank of Ningbo (002142.SZ), Jiangsu Changshu Rural Commercial Bank (601128.SH); Medium-term dividends being distributed continuously, the high-dividend strategy halfway not yet complete: Focus on stable large banks + high-dividend quality regional city commercial banks, suggest paying attention to state-owned major banks, Bank of Jiangsu (600919.SH), Bank of Chengdu (601838.SH), Shanghai Rural Commercial Bank (601825.SH).
Risk Warning: Increased pressure from economic downturn, exposure to local government financing and real estate risks, and credit disbursement falling short of expectations.
