Big financial joint pull up! LPR interest rate cuts release energy, and the two "10 billion giant ETFs" have risen sharply

The central bank announced the "double drop" of LPR before the market, which showed its full power. On January 20, the two star industries in the field of big finance, banks and brokers, rose strongly in response. In terms of bank stocks, Qilu Bank and Ping An Bank rose by 6.47% and 5.03% respectively, and China Merchants Bank and Bank of Hangzhou both rose by more than 3%; in terms of securities stocks, Hualin Securities rose and stopped, Great Wall Securities rose more than 7%, and Guotai Junan and Huatai Securities rose in the front. EtF (512,800), the largest and most liquid bank in A-shares, closed up 1.86% with a daily turnover of 566 million yuan. On the other hand, the A-share market vane - brokerage ETF (512000) closed up 1.49% in a single day, with a daily turnover of 1.159 billion yuan. The members of these two "10 billion ETF clubs" have both ushered in a sharp rise, which can be seen to be the most direct beneficiaries of interest rate cuts.

On the news side, the Chinese Bank authorized the National Interbank Lending Center to announce that the quoted interest rate in the loan market on January 20, that is, the LPR is: 1-year LPR is 3.7%, down 10 basis points; the LPR above 5 years is 4.6%, down 5 basis points. This is the first downward revision of the LPR over a 5-year period since April 2020.

The power of interest rate cuts is on full display! Big financial joint pull up

At present, the 2021 performance forecasts of securities companies have been released one after another, and the net profit growth rate is at least 30%, and the net profit growth rate of more securities companies is as high as 400%. The announcement of CITIC Securities, the "first brother of securities companies", shows that it is expected to achieve a net profit of 22.979 billion yuan in 2021, an increase of 54.2% year-on-year. Zhongyuan Securities expects that the net profit attributable to the mother will increase by 376 million yuan to 456 million yuan in 2021, an increase of 360.20% to 436.90% year-on-year. In addition, the performance of bank stocks in 2021 also exceeded expectations, of which the net profit of Industrial Bank in 2021 increased by 24.1% year-on-year, and the year-on-year growth rate hit a new high in nearly 9 years. Sunong Bank's net profit increased by 20.7% year-on-year, a new high in nearly 10 years. At present, more than 11 banks have predicted that the net profit attributable to the mother in 2021 will grow by more than 20% year-on-year! The performance of securities companies and banks has shined brightly, which has strongly boosted the confidence of the large financial sector.

As of January 20, the latest valuation of the securities sector is 1.72 times PB, which shows that the fundamentals, policies and sector valuations form a great contrast. Brokerage earnings continue to reach new highs, relative to ROE is close to the previous bull market (2015-2016) level, but its valuation is still at the bottom of the historical valuation of 1/4 quantile, brokerage long-term and short-term allocation value is continuing to highlight. On the other hand, the Price-to-Earnings ratio of the China Securities Bank Index is 5.43 times, the price-to-book ratio is 0.65 times, and the price-to-book ratio of the index is lower than that of nearly 98% since its listing in 2013, and the dividend yield is nearly 5%. Wind data statistics in the past 10 years of historical data found that the lower the overall price-to-book ratio of the banking sector, corresponding to the probability of income in the next 1 year, the expected yield space continues to rise.

The performance exceeded expectations, and the low valuation advantage of the superimposed plate is stimulated by the central bank's interest rate cut, forming a "Davis double-click". According to the analysis of professionals, the timing and amplitude of the two policy interest rate reductions slightly exceeded market expectations, and the interest rate cut released a clear signal of stable growth, which is conducive to the improvement of the risk appetite of the equity market, and the wide liquidity to the wide credit stage, and the securities stocks have benefited significantly. During the wide credit period from January 1 to April 19, 2019, the brokerage index rose by 52%, compared with the excess return of the CSI 300 index by 15%.

Popular investors are adding positions to brokers in "real money". According to the information disclosed by the Hong Kong Stock Exchange, Yang Dong's 10 billion private equity Ningquan Assets has recently increased its holdings in securities companies again, and on January 4, it increased its holding of 3 million H-shares of Zhongyuan Securities, costing about HK$4.256 million. After the increase in shareholding, Ningquan Asset Management has accumulated more than 146 million H shares of Zhongyuan Securities as an "investment manager", accounting for 3.15% of the total share capital of the latter, with a market value of about HK$220 million.

Northbound funds, foreign capital, and main funds have continued to increase the number of "undervalued + growth" bank stocks. On January 19, the banking sector received a net purchase of 1.8 billion yuan from northbound funds, ranking second in the market. According to the Hong Kong Stock Exchange, on January 7, UBS Group added nearly HK$100 million to china merchants bank H shares. On January 5, JPMorgan Chase & Co. Group added HK$721 million to china merchants bank H shares. The main funds also increased their holdings in bank stocks at the same time. As of the close of trading on January 20, the banking sector had another net inflow of 5.817 billion yuan of main funds in a single day, ranking second among the 31 Shenwan first-class industries, and the non-banking finance in the first place was as high as 6.620 billion yuan, of which the main inflow into the securities sector! The total amount of securities companies + banks throughout the day has obtained a net purchase of more than 11 billion yuan of main funds!

With the huge influx of funds, the size of brokerage ETFs (512000) and bank ETFs (512800) continues to rise. As of January 19, the latest scale of securities company ETFs (512000) reached 25.105 billion yuan, ranking second in the scale of ETFs in all industries in Shanghai and Shenzhen, and the latest estimated size of bank ETFs (512800) exceeded 10.2 billion yuan, ranking among the largest and most liquid bank index ETFs in A-shares.

The head broker analyzed that there is still a possibility of interest rate cuts in the first quarter

GF Securities believes that when the turnover of securities companies accounts for less than 2% of the entire market, that is, when the whole market is in a state of low allocation to the securities sector, if there is liquidity and policy stimulation, its allocation ratio may rise from 2% to 8% to 10%. At present, the market's allocation of securities stocks is less than 2%, on the one hand, it is waiting for the central economic work conference to send out a signal of steady growth, on the other hand, it is waiting for the clearance of the risks of the real estate sector, combined with the recent favorable policies, it is indeed a very good time to allocate the securities sector.

Huatai Securities said that in the history of the review, the banking sector often obtained excess returns relative to the Shanghai Composite Index in January, mainly driven by performance release, policy catalysis and capital allocation. It is expected that the fundamentals of listed banks will continue to improve in 2021, with profit growth rates reaching 12.9%. Standing at the current point in time, in the context of the continuous improvement of bank fundamentals, more proactive policies, and the switching of capital style to low-value plates, we are firmly optimistic about the repair of the banking sector.

CITIC Construction Investment Securities said that the interest rate cut window has not been closed, and there is still a possibility of interest rate cuts in the first quarter. In the short term, if there is market fluctuations, the central bank will hedge the short-term fluctuations in the currency market through the accurate release of OMO and MLF, providing a stable monetary environment. In the medium term, the first quarter is a superposition period before the Fed raises interest rates, inflation pressure is small, economic downward pressure is large, credit risk trigger, the central bank press conference also released a strong easing signal, and there is a possibility of RRR cut. In terms of interest rate cuts, we must continue to observe, but the interest rate cut window has not been closed, and there is still a possibility of interest rate cuts in the first quarter.

According to public information, the brokerage ETF (512000) is an investment tool that accurately points to the securities sector, tracking the China Securities Index (code 399975). The top 5 weights of the index accounted for 46%, the top 10 weights accounted for 62%, 60% of the positions were concentrated in the top ten leading securities companies, investment bank leaders and wealth management leaders gathered; the other 40% of the positions took into account the high elasticity of the performance of small and medium-sized securities companies, absorbed the characteristics of small and medium-sized securities companies, and was an efficient investment tool that concentrated on the layout of head securities companies and at the same time took into account small and medium-sized securities companies.

Bank ETF (512800) tracks the China Securities Bank Index, which contains 40 listed bank stocks, of which 70% of the positions focus on high-growth bank stocks such as China Merchants Bank, Industrial Bank, Ping An Bank, Bank of Ningbo, bank of Jiangsu, etc., focusing on growth and higher investment win rates. As of the close of trading on January 20, the bank ETF (512800) has risen 6.54% since the beginning of the year, outperforming 29 of all 41 listed bank stocks listed in the same period of A-shares, with a winning rate of more than 73%.

This article is from the financial community