The 'Reviewing Chinese Stocks' column: I have always held the view that, apart from the four major mainland banks, I would not touch other mainland bank stocks, especially regional ones, because the four major mainland banks are backed by 'the big brother.' Even under adverse operating conditions, they will ultimately be safe and have the ability to pay dividends.
In reality, the four major mainland banks are among the most profitable companies in the Hong Kong stock market due to their very wide moat! As for the four major mainland banks (one could勉强 add Postal Savings Bank to make it five major mainland banks, since it is also one of the state-owned commercial banks and nationwide), I only view them from an income-generating perspective. From a recommendation standpoint, I do not oppose investors buying mainland bank stocks, especially those who bought at lower levels in earlier years, but I do not particularly encourage it either.
Recently, a friend asked me whether the Hong Kong stock market this year has been lackluster? Because the overall market has been fluctuating, and recently, especially at the beginning of the interest rate hike cycle, it even feels shaky.
But I told this friend that it is mainly due to the poor performance of the leading blue chips that gives investors this impression. In fact, this year is not without significant gains among large blue chips! After the third quarter ended, I reviewed the performance of blue chips for the first three quarters and found that the performance of blue chips varied greatly!
The blue chip with the strongest gain has outperformed the second-place blue chip by a wide margin, and that stock is Lenovo Group (00992), which I previously reviewed. In just nine months, Lenovo's gain exceeded 2.7 times, and the main increase was concentrated in the second and third quarters!
The second and third positions are occupied by the twin gems of the WuXi group, namely WuXi AppTec (02359) and WuXi Biologics (02269). The former gained over 100%, while the latter gained nearly 80%. Do you feel a bit of a bull market?
*BOC twins gained over 30% in the first three quarters*
However, the next few gains are relatively normal, but I find it somewhat abnormal that among the top ten, there are actually two bank stocks. One of them is Bank of China (03988), one of the four major mainland banks, with a gain of 36%; the other is its affiliate, Bank of China Hong Kong (02388), with a gain of nearly 33%.
If we extend to the top twenty gainers, we will also see Construction Bank (00939) and Industrial and Commercial Bank of China (01398). The former gained over 27%, while the latter gained nearly 23%. That means the three large mainland bank stocks included in the Hang Seng Index components are all among the top twenty gainers for the first three quarters of this year!
As for another large mainland bank, Agricultural Bank of China (01288), which is not a blue chip, it also achieved a 14% gain in the first three quarters, clearly lagging behind the other three, but its performance has already surpassed many large tech stocks.
After years of ups and downs, mainland bank stocks have surprisingly shown a transformative performance this year. I can only describe it as they have returned. In fact, this is not without precedent.
In my review two years ago, I already pointed out that under the shadow of the property sector's debt crisis, the non-performing loans of the four major mainland banks continued to improve, and their core capital kept increasing. Investors should look at them differently.
In the past few years, the operation of mainland banks has indeed not been easy. Banks are the mother of all industries and have the responsibility to assist various industries in operating smoothly. This responsibility has become even more important against the backdrop of the weakening of the mainland economy in recent years.
But important as it is, knowing the environment is adverse, yet still having to lend money, is indeed a difficult decision. But difficult as it is, they cannot completely escape this responsibility, truly caught between a rock and a hard place.
But no need to worry, as long as they are large state-owned commercial banks under 'the big brother,' as long as they fulfill their social responsibilities, 'the big brother' will take notice.
*ICBC and ABC receive central capital injection*
At the beginning of last month, the central government announced that the Ministry of Finance will issue 300 billion yuan (RMB, same below) in special treasury bonds to support eight central financial enterprises in replenishing their core tier-1 capital, including two large state-owned commercial banks: one is ICBC, the other is ABC.
ICBC will issue 100 billion yuan in A-shares, of which the Ministry of Finance will subscribe for 70 billion yuan, and China Tobacco Corporation and its subsidiaries will subscribe for the remaining 3 billion yuan. ABC will issue 160 billion yuan in A-shares, of which the Ministry of Finance will subscribe for 130 billion yuan, and China Tobacco Corporation and its subsidiaries will subscribe for the remaining 3 billion yuan.
From a macro perspective, this move by the central government takes into account the continuously rising domestic and international financial risks. To enhance the resilience of the financial system, prevent systemic risks, and strengthen the capabilities of these large financial enterprises to withstand risks and extend credit, it is indeed a strategic consideration.
However, even so, my investment stance on the four major mainland banks (or five major mainland banks) remains unchanged. The reason is that as income-generating stocks, these mainland bank stocks are still unsatisfactory because their dividend payout ratios remain very low, only about 30%. However, one thing has improved: starting from 2024, they will begin to pay interim dividends. But if the dividend payout ratio is not increased, paying interim dividends is merely advancing part of the final dividend, which is still not sufficient!
I know that there are still many investors holding mainland bank stocks for dividends. Therefore, next time I will review the investment value of the four major mainland banks from an individual stock perspective. Senior Analyst, ET Net Communications, Law Kwok Sum
*The signed and/or unsigned articles published in ET Net are the authors' personal opinions and do not represent ET Net's position. ET Net's role is to provide a free forum for discussion.
In reality, the four major mainland banks are among the most profitable companies in the Hong Kong stock market due to their very wide moat! As for the four major mainland banks (one could勉强 add Postal Savings Bank to make it five major mainland banks, since it is also one of the state-owned commercial banks and nationwide), I only view them from an income-generating perspective. From a recommendation standpoint, I do not oppose investors buying mainland bank stocks, especially those who bought at lower levels in earlier years, but I do not particularly encourage it either.
Recently, a friend asked me whether the Hong Kong stock market this year has been lackluster? Because the overall market has been fluctuating, and recently, especially at the beginning of the interest rate hike cycle, it even feels shaky.
But I told this friend that it is mainly due to the poor performance of the leading blue chips that gives investors this impression. In fact, this year is not without significant gains among large blue chips! After the third quarter ended, I reviewed the performance of blue chips for the first three quarters and found that the performance of blue chips varied greatly!
The blue chip with the strongest gain has outperformed the second-place blue chip by a wide margin, and that stock is Lenovo Group (00992), which I previously reviewed. In just nine months, Lenovo's gain exceeded 2.7 times, and the main increase was concentrated in the second and third quarters!
The second and third positions are occupied by the twin gems of the WuXi group, namely WuXi AppTec (02359) and WuXi Biologics (02269). The former gained over 100%, while the latter gained nearly 80%. Do you feel a bit of a bull market?
*BOC twins gained over 30% in the first three quarters*
However, the next few gains are relatively normal, but I find it somewhat abnormal that among the top ten, there are actually two bank stocks. One of them is Bank of China (03988), one of the four major mainland banks, with a gain of 36%; the other is its affiliate, Bank of China Hong Kong (02388), with a gain of nearly 33%.
If we extend to the top twenty gainers, we will also see Construction Bank (00939) and Industrial and Commercial Bank of China (01398). The former gained over 27%, while the latter gained nearly 23%. That means the three large mainland bank stocks included in the Hang Seng Index components are all among the top twenty gainers for the first three quarters of this year!
As for another large mainland bank, Agricultural Bank of China (01288), which is not a blue chip, it also achieved a 14% gain in the first three quarters, clearly lagging behind the other three, but its performance has already surpassed many large tech stocks.
After years of ups and downs, mainland bank stocks have surprisingly shown a transformative performance this year. I can only describe it as they have returned. In fact, this is not without precedent.
In my review two years ago, I already pointed out that under the shadow of the property sector's debt crisis, the non-performing loans of the four major mainland banks continued to improve, and their core capital kept increasing. Investors should look at them differently.
In the past few years, the operation of mainland banks has indeed not been easy. Banks are the mother of all industries and have the responsibility to assist various industries in operating smoothly. This responsibility has become even more important against the backdrop of the weakening of the mainland economy in recent years.
But important as it is, knowing the environment is adverse, yet still having to lend money, is indeed a difficult decision. But difficult as it is, they cannot completely escape this responsibility, truly caught between a rock and a hard place.
But no need to worry, as long as they are large state-owned commercial banks under 'the big brother,' as long as they fulfill their social responsibilities, 'the big brother' will take notice.
*ICBC and ABC receive central capital injection*
At the beginning of last month, the central government announced that the Ministry of Finance will issue 300 billion yuan (RMB, same below) in special treasury bonds to support eight central financial enterprises in replenishing their core tier-1 capital, including two large state-owned commercial banks: one is ICBC, the other is ABC.
ICBC will issue 100 billion yuan in A-shares, of which the Ministry of Finance will subscribe for 70 billion yuan, and China Tobacco Corporation and its subsidiaries will subscribe for the remaining 3 billion yuan. ABC will issue 160 billion yuan in A-shares, of which the Ministry of Finance will subscribe for 130 billion yuan, and China Tobacco Corporation and its subsidiaries will subscribe for the remaining 3 billion yuan.
From a macro perspective, this move by the central government takes into account the continuously rising domestic and international financial risks. To enhance the resilience of the financial system, prevent systemic risks, and strengthen the capabilities of these large financial enterprises to withstand risks and extend credit, it is indeed a strategic consideration.
However, even so, my investment stance on the four major mainland banks (or five major mainland banks) remains unchanged. The reason is that as income-generating stocks, these mainland bank stocks are still unsatisfactory because their dividend payout ratios remain very low, only about 30%. However, one thing has improved: starting from 2024, they will begin to pay interim dividends. But if the dividend payout ratio is not increased, paying interim dividends is merely advancing part of the final dividend, which is still not sufficient!
I know that there are still many investors holding mainland bank stocks for dividends. Therefore, next time I will review the investment value of the four major mainland banks from an individual stock perspective. Senior Analyst, ET Net Communications, Law Kwok Sum
*The signed and/or unsigned articles published in ET Net are the authors' personal opinions and do not represent ET Net's position. ET Net's role is to provide a free forum for discussion.
