In recent days, several major state-owned banks listed in the Hong Kong stock market, including Industrial and Commercial Bank of China (ICBC), Postal Savings Bank of China, and China Construction Bank, have seen significant increases in their shareholdings, indicating a renewed interest from large institutional investorsThese moves suggest a robust confidence in the banking sector, particularly in the context of long-term investment stability and attractive dividends.

According to a report from Chuangyuan Futures, one of the primary reasons insurance funds are increasingly purchasing shares in banks is due to their reputation for stability and comparatively high dividend yieldsThis trend is expected to continue into 2024, with the banking sector likely seeing considerable gains, making it an attractive choice for long-term capitalAnalysts have indicated that attention will need to be paid to how these investment preferences shift in 2025.

Investment Value of Bank Stocks

On December 31, 2024, Ping An Life Insurance Company made a public announcement revealing that it had entrusted Ping An Asset Management to acquire H-shares of ICBC

By December 20, 2024, Ping An's holdings reached a remarkable 15% of ICBC's H-share capital, triggering a regulatory response under Hong Kong’s market rulesThis significant acquisition underscores the commitment of institutional investors to solid banking entities.

Moreover, on December 18, 2024, Ping An further increased its stake in China Construction Bank by acquiring approximately 67.7 million H-shares at a price of HKD 6.3055 per share, totaling about HKD 427 millionFollowing this purchase, the total shareholdings rose to about 12.039 billion shares, translating to a 5% ownership stake in the bankRecently, on December 24 as well, Ping An Asset Management raised its profile in Postal Savings Bank, acquiring an additional 3.5 million H-shares for around HKD 16.4 million, pushing its total stake over the 1% mark of the total share capital.

What Sparks the Surge in H-Shares?

According to Gao Chengfei, the director of Guangzhou Tiaoyuan Marketing Consulting Company, the high dividends and robust financial structures of these banks serve as major attractors for institutional investors

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In an era of declining risk-free interest rates, bank stocks with their strong dividends have certainly become a point of attraction for savvy investors, allowing them to position capital in what they deem a secure environmentFurthermore, the earlier undervaluation of bank stocks has started to dissipate, especially with recent positive policy changes that have rekindled optimism about the performance of these entitiesSome unique regional banks have even begun to showcase growth potential, drawing increased focus onto established state-owned institutions that are seen as stable investment vehicles.

Yang Haiping, a special researcher for the Beijing Wealth Management Association, pointed out that since 2024 began, bank stocks have drawn heightened attention from investors due to their defensive characteristics and the steady performance of state-owned banksThe banks’ dividend performance, impressive dividend yield, and reputable branding present a compelling case for institutional investors who favor solid asset allocation strategies in their portfolios.

Furthermore, industry observers maintain that the Central Economic Work Meeting's directives regarding monetary policy for 2025 bolster bank stocks

The nuances of interest margin policies, particularly regarding loan and deposit rates, and the associated cost-saving measures, lend positive support to the projected growth of bank stocks.

Why H-Shares?

When querying why H-shares have captured such attention from investors, Gao Chengfei remarked that one reason is the disparity in pricing between H-shares and their A-share counterpartsThe discount associated with H-shares amplifies their dividend advantageIn addition, the H-share market benefits from a higher degree of internationalization, attracting overseas capital, particularly since it offers higher dividend returns in a low global interest rate environmentThis makes state-owned bank H-shares and their liquidity favorable for large transactions, reinforcing the inclination to increase holdings in this segment.

In another notable investment move unrelated to the state-owned banks, New Hope Chemical has also made strides by increasing its holdings in Minsheng Bank’s H-shares through concentrated bidding, acquiring about 17.6 million shares recently, amounting to a 0.04% increase in the total bank capital.

According to recent data as of January 3, 2025, the dividend yields of H-shares from the six state-owned banks range from 6.5% to 10.8%, consistently exceeding those of A-share banks

Analysts suggest this could be due to the preferences of different investor bases, market liquidity, and currency exchange considerationsThis indicates that banks listed on the H-share market may provide more appealing dividend returns for investors.

The investor composition in these markets reflects key differences; A-share investors primarily consist of retail participants who often favor short-term capital gains, resulting in less emphasis on dividend yieldsConversely, H-share markets are predominantly driven by international institutional investors who focus on long-term investments and value propositions, making high dividend assets particularly desirableNotably, the H-share market’s international character enhances its liquidity, allowing for smoother capital movements and more accurately representing the inherent value of bank stocks, thereby providing authentic reflections of their dividend yields.