China Traders Turn to Bank Stocks as Market Darlings Plunge
- The CSI 300 Banks Index has risen 12% so far this year
- Lingze Capital sold growth shares, bought bank stocks
China’s most-shunned sector is getting a rare moment in the sun as investors seek shelter from a rout in the market’s darlings.
The CSI 300 Banks Index has climbed 12% this year and is trading near the highest since 2007 even as price-to-book valuations remain at just over half of its 14-year average. Liquor maker Kweichow Moutai Co., a favorite among investors, is down 21% from a February peak, with 30-day volatility at a two-year high.
Appetite for Chinese bank stocks, long regarded as perennial laggards, is growing as investors hunt for cheaper parts of the market to escape lofty valuations in growth shares spurred by liquidity-fueled gains this year. That also comes as investors recast expectations for the year amid a surge in U.S. sovereign bond yields that’s sent global bank shares higher.
“Banks are the safest pocket to stay and the primary opportunity for the year, and we think the rally will be across the board, not just in the leaders,” said Wang Zhuo, fund manager at Shanghai Zhuozhu Investment Management Co. His fund unloaded about half of its holdings in consumer and technology stocks which turned expensive, and bought banks and other undervalued shares, he said.