Core viewpoints
In terms of securities, since April, the CSRC and local securities regulatory bureaus have strengthened their law enforcement under the tone of strict supervision of the securities industry. The strict supervision of the industry may cause short-term performance pressure, but with the improvement of the internal control ability of securities firms and the restructuring of the logic of supervision and business development, the current strict supervision environment may promote the industry to form a high-quality development pattern, leading companies in the industry are expected to benefit, and industry mergers and acquisitions are expected to speed up.
It is suggested to focus on CITIC Securities, China Galaxy, Huatai Securities, and Guolian Securities and Founder Securities with M&A prospects under the background of "first-class investment bank construction".
In terms of insurance, we believe that the core is still in the investment side. With the issuance of ultra long term special treasury bonds, the pressure on fixed income of the insurance investment side is expected to ease; Against the background of declining interest rates, the market is concerned about the fixed income allocation on the insurance investment side. However, we think it is necessary to pay attention to the contribution of the coupon on the fixed income stock of insurance assets, as well as the increase in fixed income income from new transactions. The current pressure on the allocation of long-term fixed income assets is expected to ease marginally. With the recovery of the equity market, the insurance asset side is expected to rise and drive the recovery of net profits. The overall valuation of the sector is still at a low level in recent years. We are still optimistic about the valuation boost of the insurance sector in the process of policy implementation and gradual macroeconomic recovery. It is suggested to focus on Ping An of China with "excellent debt+recovery of beneficiary real estate", China Pacific Insurance with "prosperity of debt side+no obvious hidden worries of asset side", Xinhua Insurance with "large proportion of equity+obvious improvement of debt side" and China Life Insurance with "stability of debt side+large elasticity of investment side".
Market review: the main index rose this week, with the Shanghai Composite Index reporting 3088.87 points, -2.07% month on month; The Shenzhen Stock Exchange Index closed at 9424.58, -2.93% month on month; The CSI 300 Index closed at 3601.48, -2.08% month on month; The GEM Index closed at 1818.56, -2.49% month on month (MoM); The non bank financial (Shenwan) index closed at 1406.16, -3.30% month on month (MoM) last week, the securities II (Shenwan) index closed at 1178.14, -3.95% MoM last week, the insurance II (Shenwan) index was 784.18, -2.67% MoM last week, and the diversified financial (Shenwan) index closed at 949.03, -4.28% MoM last week; The China Securities Composite Bond (net price) index closed at 102.89,+0.06% month on month.
This week, 494.135 billion shares were traded in Shanghai and Shenzhen, with a turnover of 5124.965 billion yuan. The daily average turnover of A shares in Shanghai and Shenzhen was 854.161 billion yuan, -0.35% month on month. As of May 24, the balance of the two financing funds was RMB 153.0252 billion, -0.26% higher than that of last week, accounting for 2.21% of the circulating market value of A-shares.
As of April 30, 2024, the scale of equity+hybrid funds was 6.07 trillion yuan, -2.82% month on month. In April, 19.9 billion equity funds were newly issued, -41.55% month on month. In terms of sector valuation, this week's PB valuation of the brokerage sector was 1.18 times, at the 1% quantile of the three-year history.
The static PEV estimates of major listed insurance companies, Guoshou, Ping An, Taipao and Xinhua, were 0.67X, 0.52X, 0.41X and 0.35X respectively. In terms of individual stock gains, brokers: Changjiang Securities+2.86% month on week, Everbright Securities - 1.66% month on week, Huatai Securities - 2.36% month on week. Insurance:
Ping An Insurance of China was -2.90% month on week, China Life Insurance was - 3.12% month on week, China Pacific Insurance was -0.14% month on week, and Xinhua Insurance was -1.48% month on week.
Securities industry view:
The implementation of the Regulations on Shareholding Reduction and the Rules on Shareholding Change is expected to strengthen the control of shareholders' behavior of listed companies and balance the investment and financing functions of the market. On April 12, the "Notice on Soliciting Public Opinions on the Administrative Measures for the Reduction of Shareholdings by Shareholders of Listed Companies (Draft for Comments)" was proposed in the "1+N" policy system of Article 9 of the State Council, and public opinions were solicited from April 12 to April 27. On May 24, the CSRC officially issued the Interim Measures for the Administration of Share Reduction by Shareholders of Listed Companies (hereinafter referred to as the "Measures for the Administration of Share Reduction"), and the Rules for the Administration of Shares and Changes in Shares of the Company Held by Directors, Supervisors and Senior Executives of Listed Companies (hereinafter referred to as the "Rules for Changes in Shareholdings"). There are 31 articles in the Measures for the Administration of Share Reduction, which generally maintain the basic framework and core content of the Several Provisions on Share Reduction of Shareholders, Directors, Supervisors and Senior Management of Listed Companies, upgrade the original normative documents to rules, strictly regulate the reduction of large shareholders, and clarify that controlling shareholders and actual controllers are breaking the distribution, cleaning up Under the circumstances that the dividend is not up to the standard, it is not allowed to reduce its shares through centralized bidding transactions or block transactions; To prevent bypass share reduction, the transferee of the agreement transfer is required to lock up for six months, all parties continue to jointly abide by the share reduction restrictions after the split of shares due to divorce, dissolution, separation, etc., and prohibit major shareholders from selling or participating in derivatives transactions with the company's shares as the subject matter, and prohibit the refinancing and lending of restricted shares, and the selling of restricted shareholders from selling securities. In addition, the provisions on liability for violation of regulations are detailed, and it is clear that measures can be taken to order buy back and turn over the price difference to the listed company for illegal share reduction. The revised Shareholding Change Rules further clarify that all parties will continue to jointly abide by the original shareholding reduction restrictions after the divorce of directors, supervisors and senior executives; The window period for prohibiting stock trading was optimized, and the directors, supervisors and senior executives were supported to increase their shares in accordance with the law. We expect that with the formal implementation of the Regulations on Shareholding Reduction and the Rules on Changes in Shareholdings, the behavior control of shareholders of listed companies and the internal governance of the company are expected to improve.
Since April, under the tone of strict supervision of the securities industry, the law enforcement efforts of the regulators have been strengthened. We expect to further improve the internal control level of securities firms and accelerate the construction of first-class investment banks. At the level of supervision and punishment, the CSRC has significantly increased its supervision on the capital market and the securities industry under the guidance of strict industry supervision since the beginning of the year. As of April 30, the CSRC had disclosed 44 decisions on administrative penalties, up 33% year on year. According to iFind statistics, from the beginning of the year to May 20, securities companies received 92 penalties from the CSRC and local securities regulatory bureaus, up 88% year on year, including 34/58 penalties in the first quarter/second quarter (as of May 20). On March 15, the CSRC proposed to "accelerate the construction of first-class investment banks", clearly pointing out that the positioning of industry institutions should be corrected, the basis for compliance risk control should be consolidated, and the industry development ecology should be optimized. We believe that strict supervision in the industry may lead to short-term performance pressure in the industry, but with the improvement of the internal control ability of securities companies and the restructuring of the logic of supervision and business development, the strict supervision environment is expected to promote the industry to form a high-quality development pattern. In addition, we believe that the rise in regulatory costs will, on the one hand, enhance the comparative advantages of the business development of leading securities firms, on the other hand, enhance the M&A willingness of small and medium-sized securities firms and accelerate industry integration. We suggest paying attention to CITIC Securities, China Galaxy, Huatai Securities, and Guolian Securities and Founder Securities with M&A prospects under the background of "first-class investment bank construction".
Insurance industry perspective:
The initial issuance of 20/30 year super long term special treasury bonds is expected to alleviate the "asset shortage" of insurance fixed income, and help the negative asset matching and investment performance. On May 17, 2024 30-year ultra long term special treasury bonds (Phase I) were officially launched, with a total amount of 40 billion yuan and a coupon rate of 2.57%; On May 24, the 20-year ultra long term special treasury bonds were also officially launched, with a scale of 40 billion yuan. We believe that with the successive issuance of ultra long term special treasury bonds, it is expected to gradually ease the "tight supply" problem of fixed income insurance in the early stage against the background of declining interest rates. As the representative of long-term funds, the issuance of ultra long term special treasury bonds is expected to help stabilize long-term interest rates and facilitate the allocation of fixed income assets on the insurance investment side, and help insurance companies better match assets and liabilities, Mitigate the potential risk of "spread loss", and the short-term insurance investment side may continue to usher in catalysis and drive the rebound of valuation.
On the whole, the insurance sector has continued to rebound due to the synchronous performance of debt and stock recently. The recovery of the asset side fundamentals is expected to improve the net profit performance and resolve the hidden worry of "interest spread loss". In addition, the overall valuation of the insurance sector is still at a low level in recent years. Therefore, although the sector valuation is volatile this week, with the gradual resolution of real estate risks and the stabilization and recovery of the macro-economy under the help of policies, Insurance funds and negative ends are expected to continue to usher in performance catalysis and drive valuation rebound. We suggest that we focus on Ping An of China, which is "outstanding debt+beneficial real estate recovery", CPIC, which is "debt side boom+asset side free of obvious worries", Xinhua Insurance, which is "large equity share+significant debt side improvement", and China Life Insurance, which is "debt side robust+investment side flexible".
Liquidity view: this week, the central bank put 68 billion yuan into the open market, including 10 billion yuan in reverse repurchase, 12 billion yuan in maturity, and 70 billion yuan in treasury cash deposit issuance.
Monetary capital: the short-term capital interest rate rose this week. The weighted average interbank offered rate in April was 1.84%. The inter-bank pledge repo interest rate of this week was R001+5 bp to 1.81%, R007+2 bp to 1.82%, and DR007+2 bp to 1.82%. SHIBOR overnight interest rate+5bp to 1.77%.
In terms of bond interest rate, the yield of 1-year government bonds this week was+2 bp to 1.63%, while the yield of 10-year government bonds was unchanged at 2.31%.
Risk factors: the implementation of capital market reform policies was less than expected, competition in the securities industry intensified, the impact of capital market fluctuations on performance was uncertain, the reform of insurance companies was less than expected, the long-term interest rate fell more than expected, the pressure on agents to fall off increased, and insurance sales were lower than expected.
