All of the big four Chinese banks are trading at a low valuation. Why is that the case and which is worth investing in?
Is it time to invest in Hong Kong now?
With the recovery of Chinese equity markets in full swing this year, the share prices of China’s Big Four banks have rallied by 12% since its low in October 2018. With improving fundamentals, we believe that they have the potential to climb even higher.
The Bank has P/E Ratio of 5.08, P/B Ratio of 0.578 and yields a total of 5.81% per annum!
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Since the recovery of the global financial crisis, there have been constant talk of the shadow banking situation in China and how most of the major banks are facing an inevitable collapse of its financial system. This has resulted in many of the major Chinese banks trading at relatively “cheap” valuation. Last year, we written about some of the major banks in China and most of them are trading below a 6 times prices to book value and below 1 times book value.
Chinese banks have been trading at valuation that can make anyone confused. Chinese major banks are among the few of the world’s largest banks by asset size, and yet their valuation makes you feel they are penny stocks. Why is that the case?