Rerate Chinese securities sector amid a reduced risk of forcing liquidation of pledged shares

14-11-2018

The Chinese securities firms are struggling in a slowing global economy, coupled with the risk of forcing liquidation of pledged shares, which resulted in a significant plunge of their stock prices. However, the People’s Bank of China rolled out a series of measures to encourage banks to further increase their lending to private enterprises. Furthermore, the China Banking and Insurance Regulatory Commission (“CBIRC”) is considering setting targets for the proportion of banks’ new corporate loans to private enterprises. We believe Chinese securities firms could gain a short-term momentum amid the risk of forcing liquidation of pledged shares being reduced. Despite the fact that earnings of Chinese securities were poor, it’s in line with market expectation and it has already been priced in. The Chinese securities firms are currently undervalued with their P/B ratio sitting below one. The sector is anticipated to gain drivers for a rerate which may present investment opportunities for investors.

Reference:
Bloomberg
CBIRC
HK Economic Journal

General Disclosure and Disclaimer
Frontier Capital Management Limited (“FCM”) is a subsidiary of Frontier Financial Group (“the Group”). It is regulated and licensed by Hong Kong Securities and Futures Commission, also is an Exchange Participant of The Stock Exchange of Hong Kong Limited, and a Direct Clearing Participant of Hong Kong Securities Clearing Company Limited.
The information contained in this website is for informational purposes, and does not intend to recommend, invite, offer, or confirm of any terms. Based on the sources that are believed to be reliable, FCM attempts to provide accurate, complete, and up-to-date information and analysis. However, FCM cannot represent or guarantee its accuracy, completeness, or timeliness of such source and information. Before making any decision on your investment, you should weigh the provided information carefully and bear any responsibility and risk incurred. And you should seek for advice of a professional financial advisor.
The Group, its subsidiaries and connected persons may have held some of the equity securities mentioned in this article, but the Group and FCM will place your financial interests ahead of their own.

Contact us

23/F, Three Exchange Square, Central, Hong Kong
General Enquiries: +852 2269 7777
Customer Service Hotline: +852 2269 7733
Email: cs@ffgwm.com