Ping An builds HK$180 billion stake in China banks on dividend bet
Ping An has since late 2024 boosted its holdings of Hong Kong-listed stocks in some of the nation's largest lenders to a combined HK$180 billion (S$29 billion), according to Bloomberg calculations based on exchange data.
Its purchases had pushed its stake in the Hong Kong-listed shares of Industrial & Commercial Bank of China to as high as 18 per cent, while holdings in China Merchants Bank and Agricultural Bank of China rose to at least 15 per cent. Its total holdings in the firms are substantially lower when also including their Shanghai-listed shares.
The aggressive purchases underscore a growing demand for high-yielding assets amid limited investment options. While Chinese authorities had guided state-backed insurers to allocate 30 per cent of their new premiums to onshore listed shares annually, Hong Kong-traded bank shares offer more appeal with cheaper valuations and high dividend yields.
At the same time, Chinese banks are suffering under record low margins and slow profit growth. The years-long property crisis has also dented balance sheets because of a jump in bad loans. The government has underscored its backing for the lenders by a massive recapitalisation.
'The historically low valuations and high dividend payouts have made banking stocks an inevitable choice for those in the hunt for dividends or long-term investors looking to build defensive positions,' said Yang Bo, an investment director with Shenzhen Zenith Investment.
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The Hong Kong-listed shares of China's largest banks had an indicated average dividend yield of more than 4 per cent, compared with a 1.65 per cent yield on the benchmark 10-year government bonds.
Other Chinese insurers had also been actively buying bank stocks. Rui Life Insurance in March raised its stake in Hong Kong-traded China Citic Bank to 5 per cent from 4.98 per cent. New China Life Insurance in January bought a 5.45 per cent stake in Shanghai-listed Bank of Hangzhou from the Commonwealth Bank of Australia.
Ping An preferred the bank stocks for their quasi-fixed-income attributes and state backing, it said in a response to a Bloomberg News inquiry. Their low volatility and high dividends will contribute substantial interest spreads, the insurer said, adding it also added non-bank shares in its portfolio to cut risks.
'We will adhere to a balanced approach of investing in both growth stocks and high-dividend value stocks,' it said.
Ping An's total investment portfolio of insurance funds is 5.9 trillion yuan (S$1 trillion).
The buying has fuelled a sector-wide rally, sending a gauge of Hong Kong-listed Chinese banks to a seven-year high. China Citic Bank, one of the best performers this year, hit a record high while AgBank closed at the highest since its 2010 listing on Tuesday (Jun 24).
Yang of Zenith said while the momentum may persist in the short term, the sustainability of the rally remains to be seen as the banks are still contending with a contraction in margins, high funding costs and weak financing needs from the real economy.
'The stock performance has deviated from banks' fundamentals,' he said. 'We will have to see whether their credit expansion translates into real economic activity, as well as how local government debt and property sector risks unravel going forward.' BLOOMBERG
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