CCTV News, Beijing, October 9 (Reporter Wu Yuting) According to the "Trading Live" report of China Central Radio and Television Station's Economic Voice, on the first trading day after the National Day holiday, the major A-share stock indexes fluctuated and adjusted, but dividend assets were overall strong. The Shenwan Bank Index rose 1.03%, with 37 of the 42 bank stocks in the red. Industrial and Commercial Bank of China and Bank of China both hit record highs. Is this rise a short-term pulse of risk aversion, or a revaluation of long-term funds?
Marginal improvement in fundamentals is not short-term speculation
Zhu Zhuojia, an investment consultant at Shenwan Hongyuan, believes that the strength of the banking sector is not a short-term hype. The underlying logic is a marginal improvement in fundamentals. Specifically, several key indicators are improving.
Net interest margin bottoms out and stabilizes: There are positive changes in the industry’s core profit drivers;
Asset quality risks continue to be mitigated: The stage of greatest pressure on banks’ asset side is passing;
Performance resilience exceeded expectations: During the economic recovery process, bank profits performed better than market expectations.
The more important background is that in a low interest rate environment, the attractiveness of banks' stable and high dividends to long-term funds such as insurance funds has greatly increased. At the same time, with the switching of capital styles before and after holidays, market risk aversion has increased, and funds have flowed out of the highly volatile growth sector and poured into more certain dividend assets. This is the direct driving force behind the strength of the banking sector against the trend.
The stock price reaches a new high, but the valuation is still on the “floor”
It is worth noting that although the stock prices of many bank stocks have reached record highs, as of now, 42 listed banks are still in a state of total net loss, with the average price-to-book ratio of the sector being about 0.6 times. Zhang Guijie, an investment consultant at Dingxin Huijin, pointed out that this is a typical dividend-driven market. The current rise in bank stock prices is due to the market's willingness to pay a higher price for stable dividends, rather than the market's expectation that the banking industry's profits will explode in the future. The market still has concerns about the bank's mid- to long-term operations, so even if the stock price reaches a new high, the valuation has not returned to above the net assets.
Zhang Guijie also warned of risks: The net loss only shows that historical valuations have been suppressed for a long time, and does not constitute a basis for valuations to be restored quickly. If the subsequent net interest margin continues to narrow and the profit growth rate declines, the low valuation may continue for a long time. A low valuation does not equate to a valuation that will be fixed immediately.
Investment strategy: clear expectations, two main lines
How should investors grasp dividend assets, especially the banking sector? Zhang Guijie suggested that the expected positioning should first be clarified and the imagination space for the elasticity of yields should be reduced. The banking sector is one of the core sources of income from dividend assets. Its returns are mainly dividends and supplemented by valuation restoration. It is not appropriate to expect short-term surges according to the standards of growth stocks.
Zhu Zhuojia suggested that two main lines should be given priority in stock selection: first, large state-owned banks with high dividend yields and relatively low volatility, which are suitable for long-term position allocation; second, high-quality city commercial banks with excellent asset quality and good regional economic foundation.
In terms of operational ideas, both of them emphasized that we should insist on placing emphasis on allocation and light on trading. It is suitable for batch layout and not suitable for one-time heavy position intervention.
Many bank stocks hit record highs, which is a microcosm of the repricing of dividend assets in a low interest rate environment. After new highs, more rationality is needed: dividends are the core source of income, and valuation repair is an auxiliary variable. Only by clarifying this logic can dividend investment be stable and long-term.
