Investment banking stocks to be cyclical and by fdjerue7eeu

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									Investment banking stocks to be cyclical and
http://www.sina.com.cn 2010 年 02 月 22 日 04:43 China Securities Journal -
Zhongzheng Wang




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Source: CSC Research and Development Department, Wind Information




□ CSC Yang Rong Wei Tao
As China's economic growth and inflation rate, we believe that the
benchmark rate will increase at some time in 2010, also will enter China's
tightening cycle. Follow the above conclusion, the short and medium term, higher
interest rates on bank stocks is bad; but if interest rates through a complete cycle, the
banks share price will increase. The long term, we give the banking sector
"overweight" rating. According to quantitative analysis of
findings, we suggest that the recovery phase of the economic cycle, choose the larger
β value of bank stocks, such as Shenzhen Development Bank and Industrial Bank
(33.99, -0.09, -0.26%); also choose relatively high interest rate sensitivity of bank
such as Bank of Beijing (15.86, -0.03, -0.19%) and Bank of Ningbo (15.09, -0.16,
-1.05%).
Changes in interest rates affect the bank's path
The effect of changes in interest rates causes the same changes in interest rates are
closely related, while the inflation rate is higher than target rate of inflation, the
central bank will raise interest rates to prevent overheating economic growth. Thus
changes in the rate of inflation and economic growth is the main reason for changes in
interest rates. Increase in interest rates early, the overall effect of the performance of
banks are: Bank of the total income increase, but the credit costs down, improve the
quality of credit assets.
First, the rate hike cycle, the benefit of the total money supply in circulation, the
banks increase the total revenue. From the Fisher equation in terms of circulation in
the money supply and velocity of the product is equal to gross national product price
and product. In the early stages of higher interest rates, if the inflation rate, and
increase economic growth, prices and GDP grows, the money supply in circulation
and the flow rate of product improvement, which is equivalent to the total supply of
money in circulation increases increase. China is bank-based financial structure, credit
expansion and money supply increase was largely completed through the banking
system, flow through the banking system and create a greater amount of money in
circulation, the banking system will also benefit from the greater. From this
perspective, the initial interest rates, bank credit expansion in the scale of the
bank's net interest income. -2,007 End of 2002, China's
macro-economic in the interest rate cycle, the period of inflation and economic
growth and steadily increased, from the initial weeks of nearly 9% to 19% of the end,
improve the rate of 10% , while the interest rates cycle, the total money supply in
circulation increased growth. After 2008, China's macroeconomic into the
rate cut cycle, the period of inflation and economic growth and the decline in Q2 in
2009 dropped to about 5% to historic lows, and then gradually rise in 2009 once again
reached 9% at the end. In the rate cut cycle, the total circulation of money supply
growth slowed down.
Second, the rate hike cycle, the RMB appreciation is expected to bring a lot of foreign
exchange, base money increased size, scale expansion of bank credit to boost bank
performance. China adopted a managed floating exchange rate system, the rate hike
cycle, the RMB appreciation is expected to increase, a lot of hot money inflows,
increased the pressure on RMB appreciation, in order to alleviate the pressure of
RMB appreciation, the People's Bank foreign exchange market
intervention, from the market buy foreign currency, the yuan invested, based on
increasing the money supply, foreign exchange scale, the banks create the money
supply increased, from this point of view, there is a natural expansion of the credit
scale power. In the rate cut cycle, and vice versa. From January 2003 to January 2008,
China for the rate hike cycle, foreign exchange increased the cumulative size of
10.4018 trillion yuan; in January 2003 the new Foreign Exchange Reserves scale of
the month was 278.2 billion yuan in January 2008 to 654.064 billion yuan, reaching
the largest monthly increase. In January 2008 after a rate cut cycle, foreign exchange
increased the cumulative size of 5.8195 trillion yuan, in August 2009, the new Foreign
Exchange Reserves scale down to 118.753 billion yuan. After September 2009, as
China's strong economic recovery, inflation is expected to increase, interest
rates began to expect the yuan appreciation expectations increased scale of hot money
inflows, increased to 406.7 billion yuan in September, December up to 2910 billion.
Again, banks, as net debtor, but also benefit the inflation rate. Inflation rate in the
process, the debtor cost of debt declined from greater benefits, because the debtor
needs to return the loan decline in purchasing power. The Bank as a financial
intermediary, obtained from the depositors to borrow funds, then funds granted loans
to finance those deposits as loan size must be less than the size, in essence, banks are
net debtors. Thus the inflation rate and interest rates, banks are favorable, mainly the
return is generally required to reduce the cost of capital.
Finally, economic growth improved asset quality of bank credit to the good, bad loans
decreased. Enterprises as borrowers, which is of the debtor status, the inflation rate in
the context of the financial burden on enterprises is essentially decreased, the
company's debt burden down. In addition, the economic growth rate
increased, the external business environment to better business performance to
improve, and business net profit also rose.
Cyclical investment banking unit of the internal logic
Interest rate is not only a major macroeconomic variables, but also investors, the main
basis for the formation of expectations, investors through interest rate changes, the
formation of the expected future changes in interest rates, while interest rate changes
based on the direction of the expected formation of macroeconomic trends.
The cycle of rising interest rates, investors expect the formation of two kinds: first, the
expected future interest rates will rise further; Second, expectations of
macroeconomic overheating. Both expected to improve investor enthusiasm, to
promote the bank shares. The expected future interest rates rise, lending rates will
improve floating in space, while in the context of economic expansion, business
investment accumulated, in order to avoid high interest rates of loans obtained, the
current demand for business loans will increase. If the size of loans to increase
lending rates at the same time increase the income of lending rates, deposit spreads
caused no increase in costs, the bank's net interest income increased to
improve the bank's net profit. In the long run, this performance will
gradually be reflected in the price of bank shares, thus bringing the market for bank
stocks rose.
Down cycle in interest rates, investors also expect the formation of two kinds: first,
the expected future interest rates may drop further; Second, expected macro-economic
downturn, both expected to weaken investor enthusiasm, which constitute a pressure
on stock prices . Expected future interest rates will further decrease the size deposits
of residents increased, the cost of funds increased by passive; during the economic
downturn, lack of corporate investment projects, corporate demand for loans also fell,
while the expected future interest rates will drop further, businesses will delay its loan
demand, the decline in loan demand during the period. The overall effect is: lending
rates decline in revenue, but the deposit interest payments increase, this will reduce
the net interest income, a negative impact on performance, which in the long term to
suppress bank stocks.
We believe that in the short term, the interest rate on bank stocks is bad; but in the
long run, bank stocks along the main driving force is the interest rate cycle, the
expected effect. In interest rates early days of the transaction, Bank stocks down;
month, the stock price will fall; However, interest rates remain unchanged in the
trading day as investors anticipated the formation of interest rates going up, and
macroeconomic optimism, enthusiasm transactions improve, thus promoting the
shares continued to rise, banks will also appear substantial performance increase. In
this wave of rate increases, the bank stocks will increase the overall performance of
the main. Early cut in interest rates, the trading day, banking stocks rose; month, the
stock price will rise; However, interest rates remain unchanged in the trading day,
investors continue to cut interest rates the formation of expectations and the expected
macro-economic downturn, trade enthusiasm cut to drag shares continued to fall, the
performance of banks will decline materially. In this wave of rate cut cycle, the
overall performance of bank stocks will drop the main.
Short-term interest rates negatively correlated with bank shares
Changes in interest rates results from the government discretionary, changes in
interest rates generally have the characteristics of inverse changes in the economic
cycle, while the bank is cyclical industry, we believe that exists between interest rates
and banking stocks were negative changes in relationships. In theory, this relationship
was established, but the empirical level, whether justified? We believe that interest
rates could affect the direct and indirect channels to the banking sector. Direct channel
is the interest rate as the cost of capital is the core variables for bank earnings, which
directly affects the corporate level from the banking sector shares. Indirect channels
are the core of macroeconomic variables as interest rates, can affect the size of the
market systematic risk, thereby affecting the level of bank stock market shares.
Interest rate changes on bank stocks effect can be divided into short-term effects and
medium effects. Short-term effect is the interest rate adjustment after the
announcement, shares the same day whether a significant change occurs; medium
effect is the announcements of interest rate adjustments, changes in interest rates
affect the bank's interim results, thus affecting the stock price movements.
According to regression analysis, first of all, the banking industry returns and
individual stock returns have made significant changes in interest rates reflect the
reverse. Shanghai and Shenzhen 300 (3248.840, -2.44, -0.07%) index returns, bank
index rate of return, rate of return of each bank shares on the rate of regression
coefficients are significant, and the sign is negative. Day in the trading day, rising
interest rates, stock prices fall, yields lower; and vice versa. Among them, Industrial,
Ningbo, Beijing maximum flexibility.
Second, the impact of changes in interest rates through the indirect channel to the date
of bank stock returns. Bank index, all bank shares on the market yields and interest
rates, the regression equation, the market rate of return coefficient is significant, but
the interest rate coefficient is no longer significant. Combining these two sets of
regression conclusion that the interest rate of return on bank shares a direct effect of
the market rate of return on bank shares offset the effects, which can be deduced: First,
interest rates affect the market rate of return, and then returns through the market
affect the bank stocks return. In the short term interest rates mainly affected by the
market level individual return, that is, through indirect channels; it is short term
interest rates can affect individual stocks from a company-wide rate of return.
Again, the expected effects of interest rate adjustments and the lag effect and less
obvious. After adding dummy variables in the regression results of 14 banks in
Beijing and Shenzhen Development Bank is expected to effect the rate of return and
the lagged effects exist, the corresponding coefficient is statistically significant, other
banks expected rate of return and the lagged effects does not exist . Meanwhile, the
banking index of the rate of return expected effects also exist. Overall, in the interest
rate adjustment before the existence of informed traders in the market, bank index to
reflect the early effects of changes in interest rates, and expected changes in interest
rates will make banking index increased by 1% rate of return; Beijing
bank's share price reflect changes in interest rates in advance, and there is
lag; Shenzhen Development's share price lagged effect, there is no
expected effect.
Cyclical investment banking unit of the internal logic
Deposit rate will be floating in space to upgrade, while in the context of economic
expansion, business investment accumulated, in order to avoid high interest rates of
loans obtained, the current demand for business loans will increase. If the size of
loans to increase lending rates at the same time increase the income of lending rates,
deposit spreads caused no increase in costs, the bank's net interest income
increased to improve the bank's net profit. In the long run, this performance
will gradually be reflected in the price of bank shares, thus bringing bank stocks rally.
Downward cycle in interest rates, investors also expect the formation of two: first, the
expected future interest rates may drop further; Second, expected macro-economic
downturn, both the investment is expected to undermine investor enthusiasm, which
constitute a pressure on stock prices . Expected future interest rates will further
decrease the size deposits of residents increased, the cost of funds increased by
passive; during the economic downturn, lack of corporate investment projects,
corporate demand for loans also fell, while the expected future interest rates will drop
further, businesses will delay its loan demand, the decline in loan demand during the
period. The overall effect is: lending rates decline in revenue, but the deposit interest
payments increase, this will reduce the net interest income, a negative impact on
performance, which in the long term to suppress bank stocks.
We believe that in the short term, the interest rate on bank stocks is bad; but in the
long run, bank stocks along the main driving force is the interest rate cycle, the
expected effect. In interest rates early days of the transaction, Bank stocks down;
month, the stock price will fall; However, interest rates remain unchanged in the
trading day as investors anticipated the formation of interest rates going up, and
macroeconomic optimism, enthusiasm transactions improve, thus promoting the
shares continued to rise, banks will also appear substantial performance increase. In
this wave of rate increases, the bank stocks will increase the overall performance of
the main. Early cut in interest rates, the trading day, banking stocks rose; month, the
stock price will rise; However, interest rates remain unchanged in the trading day,
investors continue to cut interest rates the formation of expectations and the expected
macro-economic downturn, trade enthusiasm cut to drag shares continued to fall, the
performance of banks will decline materially. In this wave of rate cut cycle, the
overall performance of bank stocks will drop the main.
Short-term interest rates negatively correlated with bank shares
Changes in interest rates results from the government discretionary, changes in
interest rates generally have the characteristics of inverse changes in the economic
cycle, while the bank is cyclical industry, we believe that exists between interest rates
and banking stocks were negative changes in relationships. In theory, this relationship
was established, but the empirical level, whether justified? We believe that interest
rates could affect the direct and indirect channels to the banking sector. Direct channel
is the interest rate as the cost of capital is the core variables for bank earnings, which
directly affects the corporate level from the banking sector shares. Indirect channels
are the core of macroeconomic variables as interest rates, can affect the size of the
market systemic risk to banks through the stock market affect the level of the stock.
Interest rate changes on bank stocks effect can be divided into short-term effects and
medium effects. Short-term effect is the interest rate adjustment after the
announcement, shares the same day whether a significant change occurs; medium
effect is the announcements of interest rate adjustments, changes in interest rates
affect the bank's interim results, thus affecting the stock price movements.
According to regression analysis, first of all, the banking industry returns and
individual stock returns have made significant changes in interest rates reflect the
reverse. Shanghai and Shenzhen 300 index returns, bank index rate of return, rate of
return of each bank shares on the rate of regression coefficients are significant, and
the sign is negative. Day in the trading day, rising interest rates, stock prices fall,
yields lower; and vice versa. Among them, Industrial, Ningbo, Beijing maximum
flexibility.
Second, the impact of changes in interest rates through the indirect channel to the date
of bank stock returns. Bank index, all bank shares on the market yields and interest
rates, the regression equation, the market rate of return coefficient is significant, but
the interest rate coefficient is no longer significant. Combining these two sets of
regression conclusion that the interest rate of return on bank shares a direct effect of
the market rate of return on bank shares offset the effects, which can be deduced: First,
interest rates affect the market rate of return, and then returns through the market
affect the bank stocks return. In the short term interest rates mainly affected by the
market level individual return, that is, through indirect channels; it is short term
interest rates can affect individual stocks from a company-wide rate of return.
Again, the expected effects of interest rate adjustments and the lag effect and less
obvious. After adding dummy variables in the regression results of 14 banks in
Beijing and Shenzhen Development Bank is expected to effect the rate of return and
the lagged effects exist, the corresponding coefficient is statistically significant, other
banks expected rate of return and the lagged effects does not exist . Meanwhile, the
banking index of the rate of return expected effects also exist. Overall, in the interest
rate adjustment before the market there are informed traders, bank index can reflect
the early effects of changes in interest rates, and interest rate changes, expected to be
able to bank profitability index increase of 1%; Beijing Bank's shares also
reflect changes in interest rates in advance, and there is lag; Shenzhen
Development's share price lagged effect, there is no expected effect.

								
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