BNP:中国金融行业下半年投资策略

CHINA FINANCIALS - GEARED FOR A RUN IN 2H

July 2007，44 pages

Banks: Excessive concern from macro perspective
Concern from a macro perspective depressed the performance of the banking sector in 1H07. Yet we expect banks to outperform in 2H because concern over deposit losses and rate hikes could turn out to be excessive. RMB2t in new loans at end-May locked in our forecast 25% average PPP growth, and the wealth effect leaves upside.

Insurers – new opportunities from deregulation
While measures to cool the rampant A-share market limit the return upside in the public market for insurers, new channels in the private segment imply even better opportunities for these companies. Sales figures in April and May exemplify the negative impact of the stock market run-up, but players with nationwide distribution still have mid-teen
premium-growth expectations. We advise investors that insurers who maintain strong top-line growth under a bull market reveal longer-term competitiveness.