中国降准 - 焦点受惠股份

The PBoC announced last Friday to cut banks’ reserve requirement ratio by 0.5ppt and an additional 1ppt for qualified city commercial banks. The move is estimated to release RMB 900bn in liquidity to shore up the real economy. Following the State Council meeting on 4 Sep which articulated some supportive measure, we believe this RRR cut has largely been priced in. Banking, insurance, brokerage, construction machinery and education are among the sectors that would benefit from this RRR cut and further potential supportive measures.

 

  • HSI may face profit-taking. While RRR cut would bode well for stock markets in theory, if the cut had already been priced in, there tend to be sell-the-fact pressure shortly after the announcements. Other important factors which may affect the stock markets: 1) China-US trade war, 2) RMB fluctuation, 3) HK social unrest, 4) any other supportive policies from Beijing.

 

  • China banks’ NIM pressure alleviated. This RRR cut would reduce banks' funding cost by approximate RMB 15bn p.a., alleviating banks' NIM pressure from potential decline in LPR. We estimate that every 50bps RRR cut would lift banks' FY20E earnings by 0.33-0.45%. We continue to prefer retail-oriented banks on more resilient NIM under interest liberalisation and less cyclicality to macro headwinds. Our sector top picks are PAB (000001 CH; BUY; TP: RMB 17.00) and CEB (6818 HK; BUY; TP: HK$4.60).

  

  • Insurers benefit from improving market sentiment.  We stay positive on the insurance sector mainly for three reasons: 1) sentiment recovery of the A-share market will contribute to investment gains, with notable YoY gain expected in 2H19 on low base; 2) NBV growth to recover in 2H19 for life insurers; 3) net investment return will not decline abruptly despite declining interest rates. Our sector top picks are China Life (2628 HK / 601628 CH; BUY; TP: HK$27.88 / RMB 37.52) and CPIC (2601 HK; BUY; TP: HK$37.12).

 

  • Brokerage sector boosted by better investor confidence. Monetary easing usually helps restoring investor confidence, and therefore lifts brokers’ performance in the short term. The sector's valuation is cheap, which is 0.79x FY19E P/B, 9% below historical average minus 1s.d. Our sector top picks are CITICS (6030 HK; BUY; TP: HK$18.7) and CICC (3908 HK; BUY; TP: HK$17.2). 

 

  • Construction machinery sector to benefit from fiscal spending. The State Council meeting confirmed measures to speed-up issuance of special-purpose bond, in an effort to spur effective investment. We believe the sector will continue to be the beneficiaries of the pro-investment approach by the government. This reaffirms our view that the upcycle will continue in 2020E. Zoomlion (1157 HK; BUY; TP: HK$6.95) remains our top pick.

 

  • Education sector – prefer higher education stocks. The State Council meeting mentioned to stabilize employment by increasing student enrolment of vocational colleges by 1mn. We think these policies are positive for higher education and vocational training sectors. Our top pick is Hope Education (1765 HK; BUY; TP: HK$1.96).
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