There are more than 4,800 stocks in the A-share market . According to the latest data on July 1, 2022, there are 7 stocks with a market value of over one trillion, namely Kweichow Moutai , Industrial and Commercial Bank of China , China Construction Bank, China Mobile, CATL , Agricultural Bank of China, China Merchants Bank . 4 of the 7 stocks are banking stocks. In fact, there are a few other companies that have exceeded one trillion in market value. Friends who know about them can share them in the comment area!
A-shares A list of shares with a market value exceeding one trillion
Source: Dianzhang Finance
The profitability of bank stocks is very strong. No listed company can match the four major state-owned banks. Each of them can have an annual net profit of more than 200 billion yuan. , of which ICBC can even exceed 300 billion yuan. But why are banks so profitable but the profits gained from buying bank stocks are so mediocre?
The main reasons are as follows:
1. Banks have little room for imagination
Stock speculation is based on expectations. Although the A-share market advocates value investment and looking at fundamentals, there are also emotional, financial and policy aspects in addition. The rise of a stock usually depends more on the subject matter and policy guidance, which fills investors' imagination. Only in this way will more funds be willing to give high valuations and drive up the stock price. For example, the previous market price of new energy vehicles is because the profits they can create are far greater than you imagine, and the future is promising and full of hope, so they can achieve such high valuations.
Looking at banking stocks, let’s take Industrial and Commercial Bank of China as an example: the net profit in 2021 is 350.216 billion yuan, which is a lot! Net profit in the first quarter of 2022 was 91.129 billion yuan, a year-on-year increase of 6%. The fundamentals are good, no doubt about it, but they won't surprise anyone. Every time the quarterly report is released, you know that the growth percentage will not exceed 2 digits. This is why the P/E ratios of bank stocks are generally very low.
ICBC net profit
Source: Dianzhang Finance
Stability is good, but this can easily lead to a lack of innovation and imagination, and it is difficult for performance to grow significantly, so it is difficult for investors to come up with reasons to give high valuations. .
The stock prices of bank stocks have not increased much in the long term. The stock prices of most bank stocks cannot keep up with the increase in profits, leaving the stock prices in a state of breaking net for a long time.
As shown below, the current median price-to-book ratio of the banking sector is 0.61, the long-term median price-to-book ratio has a median 1.09, and the long-term median price-to-book ratio is currently in the 1% range, and has been at an extremely low position for a long time.
Median price-to-book ratio of the banking sector
Source: Dianzhang Finance
2. The banking sector is heavily weighted
The banking sector accounts for a very high market capitalization. There are 42 banking companies with a total market capitalization of 10 trillion, which is a very heavy weight! Due to its large market capitalization, its rise and fall also deeply affects the index. A sharp rise or fall will cause a sharp rise or fall in the index, affecting market sentiment. And if you want to boost the banking sector with such a large market capitalization, you have to invest a lot of money, which makes it difficult to pull it up. Therefore, people are unwilling to invest money in banking sectors that are inefficient and can easily cause excessive index swings.
Although it is difficult for banks to rise, there are still many foreign funds that allocate bank stocks for the high dividend rates of banks, and some of them have also experienced large increases in small and medium-sized city commercial banks, such as Bank of Nanjing , Ping An Bank , Changshu Bank , etc.
The author believes that bank stocks can be played with large sums of money. It is not cost-effective for ordinary investors to buy bank stocks, so it is better to look at high-growth industries. If you agree, you can deduct 666 support in the comment area~
The above is all the content. What do you think of bank stocks? Welcome to leave a message in the comment area. Love life, know how to invest, follow the author, and reap different wonderful things.
Disclaimer: The stocks, industries, markets and other securities involved in this article are for reference only and do not constitute any buying and selling advice. No investment returns are promised. Investment is at your own risk! I and the company do not bear any investment risks and responsibilities! Hereby declare! The stock market is risky, so be cautious when entering the market.
Yan Huizi’s employment certificate number: A0460121090013, Aniu Intelligent Investment business license: 91370100724977116F.
