China Banks – Reserve Requirement Ratio Cut Not Necessary, a Signal More than Anything

China Banks – Periphery Lender Reveals Worsening Financials

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

<p>Following the announcement of the Chinese central bank’s required reserve ratio, or RRR, cut of 50 basis points, effective July 5, we retain our fair value estimates for the Chinese banks we cover, as the positives of liquidity injections are largely offset by downward pressures on credit quality, in our view. Chinese banks under our coverage are trading at three-year lows on our valuation level of 0.4-0.8 times forward price/book, except for <a href="https://www.smartkarma.com/entities/10987" target="_blank" data-smartkarma-citation="entities:10987:1">China Merchants Bank H (3968 HK)</a>. This is…</p>

Following the announcement of the Chinese central bank’s required reserve ratio, or RRR, cut of 50 basis points, effective July 5, we retain our fair value estimates for the Chinese banks we cover, as the positives of liquidity injections are largely offset by downward pressures on credit quality, in our view. Chinese banks under our coverage are trading at three-year lows on our valuation level of 0.4-0.8 times forward price/book, except for China Merchants Bank H (3968 HK). This is…

Positives of RRR Cut Are Likely to Be Offset by Rising Credit Quality Pressures as Economy Weakens