Citigroup Inc. (NYSE:C)’s recent Global Financial Conference in Hong Kong provided investors and analysts alike the opportunity to interact with and hear the latest news from financial industry professionals from around the world, including Asia. In a brief report on Asian banks released by Citi Research today, it was mentioned that senior management of all of the major Asian banks attended, and most made presentations regarding current operations and future plans.
Major topics among presenting Asian financial institutions included liquidity outlook, impending structural reforms in China, property prices in Hong Kong and Singapore and Singapore, and asset quality more generally.
The significance and eventual instantiation of the “reform blueprint” formulated at China’s Third Plenary Session was among the hottest topics, especially financial reforms such as rate liberalization and deposit insurance and the impact of a clampdown on interbank business. The general conclusion in both cases was while the measures might result in short term pain, these kind structural reforms would offer significant long-term benefits to the banking sector and the economy as a whole.
Participants from Hong-Kong and Singapore were not shy about discussing the likelihood of property value declines and the potential impact on the banking industry given the implementation of restrictive new banking regulations. However, management guided that even a 10 to 15% percent drop in property values would not significantly impact the quality of bank assets. That said, several Singapore banks have commented that mortgage applications have fallen 30% year over year since the implementation of the new measures.
Asian banks stocks to consider
Citi Research’s current top picks in the sector include:
Top Buys – KASIKORNBANK PCL (BKK:KBANK), Siam Commercial Bank PCL (BKK:SCB), China Construction Bank Corporation (HKG:0939) (SHA:601939), HSBC Holdings plc (ADR) (NYSE:HSBC) (HKG:0005), DBS Group Holdings Ltd (SGX:D05).
Top Sells — IndusInd Bank Limited (NSE:INDUSINDBK) (BOM:532187), Banco BPI SA (ELI:BPI), BBCA, Fubon Bank (Hong Kong) Limited (HKG:0636)
The report also mentions China Life Insurance Company Ltd. (ADR) (NYSE:LFC) as a possible beneficiary of the emphasis on the importance of old age protection in the Third Plenary Session.