Morgan Stanley-China – Banks Look for outperformance for the fourth year i...-109875071(1)

MAsiaPacificInsightChina–BanksLookforoutperformanceforthefourthyearinarowMorganStanleyAsiaLimited+RichardXu,CFAEquityAnalystRichard.Xu@morganstanley.com+8522848-6729ChiyaoHuangEquityAnalystChiyao.Huang@morganstanley.com+8523963-4624BerylYangResearchAssociateBeryl.Yang@morganstanley.com+8523963-2224ChinaFinancialsAsiaPacificIndustryViewAttractiveWhat’sChangedPostalSavingsBankofChinaCoLtd(1658.HK)FromToTopPick1988.HK1658.HKRelatedreports:China's3DJourney–Financials:Assessingthecostofsupportingongoingindustrialupgrades(21May2024)ChinaFinancials:Trackingindustrialrisk:Moresignsofearlierthanexpectedcapacityrationalization(2Jul2024)ChinaFinancials:ThirdPlenumdecisionstoreducefinancialriskfurther(22Jul2024)WethinkChina'smajorshifttoprioritizefinancialriskcontainmentvs.supportinggrowthwillcontinuetopayoffandhelpmajorbankstogeneratesustainableshareholderreturnsinamoreprudentdevelopmentenvironmentinChina,inwhichvalueanddividendscouldstilloutperform.Chinahaseffectivelyshiftedfocusfromgrowthtoriskcontainment…Thismajorshift–whichstartedin2021–hasproventobesustainable,despiteinitialmarketsuspicions....whichhasledtothreeyearsofoutperformance(2022-2024YTD)foritsbankstocks:TotalreturnsforbothA-shareandH-sharebanksthatwecoveronaveragewere~35%forthepastthreeyearsasofJuly30,2024.Theywerearound-25%and-28%fortheCSI300andHang...