(March 2021)

The Chinese banking sector has a tighter leash with regulators than most all other countries. For the most part, this oversight keeps investors away, but a new day has come for the Chinese banking sector. Many investors are scouring previously underinvested industries to find value as Chinese mainstays have dipped. China’s cap-weighted index, CSI 300 Bank Index is up 12% YTD, despite fundamentals being relatively unchanged. Investors are veering away from companies that form the CSI 300 consumer staples index, seeing rising price-to-earnings ratios as a warning sign. Many also expect the regulatory burdens facing Chinese banks, who are being asked to support the economy with low-interest rates, to be lifted. Higher interest rates would bolster future earnings for the banking sector.

(Beijing)

FINSUM + Magnifi: Chinese banks have been a hidden gem for investors as of late. Many are typically cautious given the country’s regulatory history, but valuations crept so high in other industries there is finally value in banking. 

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