The rally in Chinese bank stocks is captivating retail investors from Hong Kong to Shanghai and Shenzhen, making it one of the hottest topics on mainland social media platforms, with many asking if it is too late to jump on the bandwagon.
Benchmarks tracking Industrial & Commercial Banking Corp (ICBC), China Construction Bank (CCB), Bank of China and their peers have risen 24 per cent in Hong Kong and 17 per cent in onshore markets. The market-beating gains are even more spectacular, coming after their best returns in 16 years in 2024.
The answers may be found in dividend payouts and sliding government bond yields, both of which have enticed insurance companies to allocate a bigger chunk of their assets into banking stocks, analysts said.
“Banks have been our top pick” within the financial sector since 2023, said Shujin Chen, an analyst at Jefferies. “For banks, the most obvious and important point is that they are relatively more likely to deliver stable returns, especially the large banks.”
Beijing last year urged listed companies to pay dividends several times a year, in advance and before the Lunar New Year, to shore up market sentiment. Authorities also restricted major shareholders from selling their stakes if their companies do not live up to marks on payouts.
Many Chinese banks took the lead, with the nation’s six major state-controlled lenders last year handing out interim dividends for the first time. Some analysts said these payouts, some as high as 60 per cent, have attracted insurers searching for higher-yielding assets.
