Better Buy: Singapore Banks vs. China Banks
In May 2018, the index began to partially include China large-cap A shares, which make up 5% of the index. Full inclusion would make up 40% of the index. China A-shares are different from B-shares. A-shares are only quoted in RMB, while B-shares are quoted in foreign currencies, such as the U.S. dollar, and are more widely available to foreign investors. Patrick Collinson was a guest on a trip organised by Fidelity Investments.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Ray Kee does not own shares in any of the companies mentioned.
You should make the decision to invest only after due and careful consideration and seek independent professional advice if you are uncertain of or have not understood the nature and risks involved in trading of ChiNext Shares. In the event of default by CSDCC, there is no guarantee that The Hongkong and Shanghai Banking Corporation Limited will be able to fully recover any affected China A Shares and/or monies fromCSDCC through HKSCC. If CSDCC defaults, HKSCC may (but shall have no obligation to) take any legal action or court proceeding to seek recovery of the outstanding China A Shares and monies from CSDCC through available legal channels and through CSDCC’s liquidation process, if applicable.
Also last week, Beijing concluded its annual policy meeting with a pledge for stable growth in 2015, which economists widely interpret to mean more rate cuts and, possibly, http://suehiro.co.th/?p=57915 even reductions in banks’ reserve ratios. Why? China’s inflation rate fell to a five-year low of 2.2% in November, and its manufacturing sector has failed to grow at all.
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Its net interest margin narrowed 54 basis points year-on-year in the fourth quarter, compared to an average decline of 29 basis points, due to pressures on China’s interbank rates. While its rivals offer a 10%-plus return on equity, ABC comes last with an ROE of only 9%. The lack of institutional ownership is a major argument for buying banks now. According to Citic Securities, Chinese domestic mutual funds had only a 2.1% weighting in Chinese banks at the end of the third quarter, even though bank stocks make up about 20% of the CSI 300 Index. As the Shanghai market heats up—average daily trading turnover soared to CNY1 trillion recently from CNY440 billion in November—domestic institutions may “unwind this underweight,” says CLSA strategist Christopher Wood, a longtime China bear who upgraded China to Neutral last week.
The selection is diversified between sector, size, and liquidity to ensure adequate representation. Thus, the http://www.ofmirroreye.net/renault-zapustili-kurs-psihologicheskih-test/ index’s performance benchmark reflects the overall situation and operation of the Shanghai securities market.
The bank was also insulated by 21% of its loans being outside mainland China, the highest among the big four. HSBC analyst Michael Chu, who has a buy rating on the H-shares with a HKD4.20 target price, says the stock should benefit from a weaker yuan, U.S. rate hikes and less exposure to non-performing loans in China. Unlike China’s mid-sized banks, BOC’s exposure to risky wealth management products is only in the mid-single digits, which is one of the lowest among Chinese banks, according to calculations by Autonomous’ Charlene Chu. There’s plenty of reasons to be concerned about China’s banks but investors shouldn’t tar them all with the same brush. Investors need to be selective.
- The risk of loss in financing a transaction by deposit of collateral is significant.
- The Chinese currency has been closely watched by investors in recent days after it weakened past the 7 level against the greenback last week, leading the U.S.
- ABC’s weaker loan book has come home to roost in its earnings, with NPLs amounting to 2.39% in 2015 from 1.54% in 2014.
- Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect links the stock markets in Shanghai and Shenzhen with the stock market in Hong Kong.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia owns shares of DBS Group Holdings Ltd. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd, United Overseas Bank Ltd and Oversea-Chinese Banking Corp. Limited.
Losses may be incurred and profits may be made as a result of buying and selling securities. ment, Personal Banking segment and Treasury segment. The Corporate Banking segment provides loan, trade financing, deposit, corporate finance, custody and other related financial products and services to enterprises, government agencies and financial institutions. The Personal Banking segment provides loan, deposit, bank card, personal finance and other related financial products and services to individual customers.
There’s not much to choose from. There are just a few exchange traded funds (ETFs), which trade like shares http://jakytraders.com/?p=21943 but mirror the price of an index (and are free from stamp duty), such as the iShares Xinhua China 25.
Typical minimum investment is £500-£1,000, or £50 per month. Avoid high initial charges by buying through a discount broker, such as Hargreaves Lansdown. While CCB’s stricter accounting weighed on its fourth quarter results, Bernstein’s Hou views the “accelerated NPL clean-up as to be a positive and should help CCB get through the credit cycle and asset quality overhang faster than peers.” CCB’s fourth quarter earnings fell 3% year-on-year, which was the worst result among the big four, as credit costs jumped 20% year-on-year and NPLs spiked 135 basis points. Hou has an outperform rating on CCB’s H-shares. However, ICBC’s earnings could be at risk of being squeezed by escalating credit costs.
China’s banks are the bedrock of its economy and the portfolios of investors in Chinese stocks. The Hong Kong-listed shares of the big four banks have a 32% weighting in the Hang Seng China Enterprises Index. Investors have been wary of bank stocks as slowing growth has sharpened focus on the quality of loan books – the MSCI China Banks Index is down 35% over the past year. Claims that non-performing loans (NPLs) among China’s banks are a little over 1% defy credulity. Leading analysts like Autonomous Research’s Charlene Chu also warn of a ticking time bomb inside China’s financial system from the bank’s role in the growth of wealth management products, or risky off-balance sheet loans made to often struggling companies and sold to investors as high-yielding deposit-like products.
Meanwhile, China banks are benefitting from the Middle Kingdom’s rapid growth. However, the quartet of China banks could be trading at a discount due to the near-term uncertainty regarding the impact of the US-China trade war, which has dented sentiment. Coupled with the ongoing protests in Hong Kong, stock valuations are comparatively lower than its Singapore peers.