GS 高华证券--行业研究--中国金融服务：看好中国银行业，提高对银行和保险公司的目标价格，

买入工商银行(A),工商银行(H)，招商银行(A)，浦发，交通银行

January 31, 2007　　　13页 英文　　pdf

Though we expect potential share price volatility on tightening/rate hike concerns in 1H2007, we remain positive on China banks in 2007 after the recent healthy correction, for four reasons:

(1) strong, visible earning growth for China banks amid strong GDP growth and benign asset quality;

(2) continuing bank reform momentum; recap/restructuring of weak banks should reduce systemic risks for banks and potential macro downside risks;

(3) 12%-18% upside for H-share banks based on a 2007 basis and potentially 30%+ upside if the market starts to rollover valuations on a 2008 basis (including 5% Rmb appreciation annually); and

(4) potential continued decline in cost of equity (COE) in both the H-share and A-share markets, in light of continued bank reforms, rapid forex reserve accumulation, structurally high banking sector liquidity and low long-term bond yields in China. Our FY2007 earning estimates are on average 11% higher than consensus. We would add to positions on any significant pullback