Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Thematic (Sector/Industry)

China Financials / Thematic (Sector/Industry)

Based on official Q119 data, Chinese banks exhibit positive fundamental trends. Combined with low RSIs and low valuations, VFM (Valuation, Fundamentals, Momentum) rankings are elevated (top quintile globally). This is also the terrain of neglected or distrusted European banks. From a long-term perspective, valuations may prove just too downtrodden.We acknowledge that sentiment towards Chinese banks and news flow has been downbeat. But not all lenders are the same. And positive news anywhere is thin on the ground. A glance at the current euro-dollar system disruption and interrelated 17 trillion dollars of negative bond yields is a global risk for all. In short, we see long-term opportunity as well as risk with some of the Chinese lenders in our sample.<div class="content-highlight">Our rankings (A+B+C) capture valuation, fundamental trends, and relative fundamental strength. The rankings point to the attributes of ABC, PSB, ICBC, and BOC. We would be less enthusiastic with China Minsheng, BCOM, and Ping An. From a pure valuation viewpoint, BOC and China Citic tick the right boxes though the latter is surely more speculative.</div>

Based on official Q119 data, Chinese banks exhibit positive fundamental trends. Combined with low RSIs and low valuations, VFM (Valuation, Fundamentals, Momentum) rankings are elevated (top quintile globally). This is also the terrain of neglected or distrusted European banks. From a long-term perspective, valuations may prove just too downtrodden.We acknowledge that sentiment towards Chinese banks and news flow has been downbeat. But not all lenders are the same. And positive news anywhere is thin on the ground. A glance at the current euro-dollar system disruption and interrelated 17 trillion dollars of negative bond yields is a global risk for all. In short, we see long-term opportunity as well as risk with some of the Chinese lenders in our sample.Our rankings (A+B+C) capture valuation, fundamental trends, and relative fundamental strength. The rankings point to the attributes of ABC, PSB, ICBC, and BOC. We would be less enthusiastic with China Minsheng, BCOM, and Ping An. From a pure valuation viewpoint, BOC and China Citic tick the right boxes though the latter is surely more speculative.

China Banks:  Deep Waters Not to Drown but to Cleanse