[ET Net News Agency, 11 September 2018] HSBC Global Research has recently met
Shanghai-based institutional investors. Overall, investors seemed bearish. Several
commented that they had raised their portfolio allocation to cash and that they were
planning to de-risk further via sector rotation and selecting the defensive stocks.
Investors attributed their concerns mostly to macro conditions and government policies,
citing uncertainties around monetary policy (whether to de-leverage or re-leverage,
support SOEs or POEs).
HSBC also sensed reduced investor confidence regarding broader innovation after setbacks
in WMPs (wealth management products) and P2P (peer-to-peer) as well as in non-bank
businesses such as telecom equipment, pharmaceuticals, education, and shared-economy
business models.
HSBC said regulatory uncertainty has increased; slower regulatory tightening may delay
China banks' progress in narrowing their credibility discount. On the positive side, the
business model still looks sustainable and profitable: (1) banks are showing solid
pricing power against borrowers, (2) commodity prices have held up well overall in the
current cycle, reducing the chance of commodity price-led asset quality pressure like that
in 2015-16, and (3) banks have de-risked over the last three years; the current asset
growth run rate points to a sustainable level of 5-10%. (KL)