Why large Chinese banks continue to hold promise
Their fundamentals are simply better, says Bernstein.
According to the research firm, Chinese banks underperformed the market on disappointing economic data & concerns about increased regulation in early April but outperformed in the final week on their Q1 '13 earnings beats, leading a slight 30bp outperformance for the month.
Bernstein Research further noted that after SHIBOR spiked towards the end of the month as liquidity tightened pre-Holiday, the Chinese central bank added RMB 124bn of liquidity to the market via OMOs. There is "no sign of tightening as key interest rates are flat-to-down, indicating loose liquidity conditions in China," Bernstein said.
"We continue to prefer the large banks as we expect their better fundamentals as reflected in their Q1 '13 & Q4 '12 earnings will be rewarded by the market," it added.
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