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Financial Industry Week Report Analysis

Date: April 15, 2024

Key Highlights and Summary:

Market Overview: The A-share market experienced a downturn last week (April 8-12). The CSI 300 Index dropped by approximately 2.58%, while the financial sector indices saw significant declines. The non-financial index fell 9.71% weekly, while the year-to-date (-YTD) returns further deteriorated across many financial sub-sectors. The bank index was the standout performer, surging ~5.8% weekly (making it the best YTD performer) despite a global decline. The insurance index plummeted ~68.1% weekly but had been performing relatively better in the long term.

Investment Recommendations:

1. Banking (High-Dividend Focus):

   • Thesis: Banking stocks offer attractive dividends despite ongoing pressure from declining net interest margins (NIM). The low valuation and high dividend yield align with the government's direction towards long-term capital market investment.
   • Recommendation: Focus on banks offering stable returns.
   • Key Sectors: High-dividend stocks.
   • Watchlist: Saturated catering (CSH), Zheshang Bank (ZSB).

2. Securities (Post-"State Measures Nine条"):

   • Thesis: The recent "State Measures Nine条" policy promotes share quality, boosting the sector's profitability through a shift towards specialized institutional competition. New regulations encourage differentiated development for smaller players led by large firms.
   • Recommendation: Focus on top-tier brokers with specialized edges. Smaller brokers facing differentiation.
   • Key Sectors: Brokerage linkage capability.
   • Watchlist: National Union Securities (NCS), Zheshang Securities (ZSS), Fosun Pharmaceutical Securities (FPSS), China CIC Properties Securities (CCPS). National Union Securities (NCS) was prominent in differentiation.

3. Insurance (Long-term Capital Inflow):

   • Thesis: The "State Measures Nine条" highly encourages long-term fund entry (e.g., pension funds, SOE insurers), which improves profitability through stable long-term investments.
   • Recommendation: Follow insurers likely to gain from attracting more long-term capital. Monitor Q1 performance.
   • Key Sectors: Long-term fund inflow.
   • Watchlist: New China Life Insurance (NCL), Ping An Insurance Group (PAG).

Regulatory Update: The report covers the down-the-line revision of the CSRC's "Regulations for the Supervision of M&A of Financial Institutions," aiming to "clarify objectives" and "problem-orientated," enhancing risk management and shareholder relations for listed financial firms. However, yield data appears inconsistent (e.g., daily revenue vs. index DRR fluctuation). The main recommendation points remain focused on the investment strategies based on the new policies and stocks' characteristics.