Credit data in June is still weak, policy tightening is imminent, and H shares of large banks are the first choice for safe havens (Deutsche Bank)

Street Signal | Credit data in June is still weak, policy tightening is imminent, and H shares of large banks are the first choice for safe havens (Deutsche Bank)

The Deutsche Bank report pointed out that although the scale of social financing and new RMB loans rebounded in June from the previous month, the credit pulse was weaker than the same period last year, the growth rate of existing stocks further slowed down, and the credit demand of enterprises and residents was weak.

The slowdown in government bond issuance indicates that there will be more policy support in the second half of the year, including accelerating government bond issuance and maintaining easy money.

In terms of investment advice, we are optimistic about large banks, with China Construction Bank H shares (0939.HK) and Bank of China H shares (3988.HK) being the first choices. The market has expected weak credit, but there is uncertainty about the pace and intensity of policy increases.

Deutsche Bank believes that policies in the second half of the year will support the bottom and benefit banks. One-sentence conclusion: June credit data confirms that the endogenous driving force of the economy is insufficient, and there is a high degree of certainty that policies will increase in the second half of the year.

H shares of high-quality state-owned banks have defensive value and potential policy catalysts. Positive/negative: Positive for China Construction Bank (0939.HK) and Bank of China (3988.HK). The market's pessimism on bank stocks has reflected credit weakness, but increased policy expectations and high bank dividends provide a margin of safety. Catalysts:

1) The July Politburo meeting’s stance on monetary and fiscal policies;

2) Whether the monthly data on social financing and new loans have improved marginally.