A series of policy shifts have boosted demand for shares in China's state-owned banks and further regulatory changes will likely drive the market capitalization of these lenders higher among their Asia-Pacific peers.
The four biggest lenders in the region by market capitalization in the December 2024 quarter were Chinese state-owned, according to S&P Global Market Intelligence data. The four are also the world's biggest lenders by assets.
Industrial and Commercial Bank of China Ltd., the world's largest lender by assets, expanded its market capitalization by 8.42% to $313.83 billion in the fourth quarter of 2024, the data showed.
Agricultural Bank of China Ltd. retained its second rank, with a 7.77% gain in market capitalization during the quarter to $251.09 billion. China Construction Bank Corp., with a 10% gain in market cap was third, trading places with Bank of China Ltd., which added 6.35% to its market cap to $201.84 billion.
Stimulus measures
Chinese authorities have launched a series of stimulus measures since September 2024, boosting locally listed shares. China's GDP grew 5.0% in 2024, in line with the government's aim.
Separately, the China Securities Regulatory Commission, the Ministry of Finance and the National Social Security Fund jointly announced a new program on Jan. 22 that sets measures to optimize investments by the National Social Security Fund and public pensions.
The new measures "involve steadily increasing the investment proportion of equity assets" of the country's public pension funds, said Niki Wu, senior analyst at Morningstar said in comments emailed to Market Intelligence. "From an equity perspective, funds could end up increasing positions toward less volatile, larger domestic companies," said Kai Wang, Asia equity market strategist at Morningstar, in the same note. That could benefit large-cap names and high-dividend stocks, Wang said.
The Chinese equity market did well last year, but "the journey [could] be a little bit more volatile than one might like," said Vis Nayar, chief of investments at Eastspring Investments, a Prudential PLC company. There were however opportunities in China for investors with longer-term positions, Nayar told Market Intelligence on the sidelines of a Jan. 21 event
Rate boost
Commonwealth Bank of Australia ranked fifth, with a market capitalization of $158.57 billion, replacing India's HDFC Bank Ltd. with $158.44 billion in market cap.
Japanese lenders posted the fastest gains in market capitalization among regional peers during the quarter. Mitsubishi UFJ Financial Group Inc., ranked seventh, grew its market cap 26.85% to $136.75 billion, the data showed. Sumitomo Mitsui Financial Group Inc.'s market cap increased 22.95% to $93.48 billion, while Mizuho Financial Group Inc.'s market cap jumped by as much as 31.60% to $62.32 billion.
"The recent rise in bank shares reflects the Bank of Japan's rate hike in late July [2024], which would increase lending margin for banks, particularly the megabanks," said Toyoki Sameshima, a senior analyst at SBI Securities. There is room for the bank shares to increase more as the central bank is still moving in the direction of raising interest rates, Sameshima said.
Many analysts expect the Bank of Japan to raise its benchmark rate to 0.5% from 0.25% on Jan. 24 after an ongoing review of monetary policy. The central bank could announce further hikes, taking its benchmark interest rate to a terminal rate of 1.0% by 2026, according to analysts.
The list of top 20 Asia-Pacific banks by market capitalization includes eight lenders from mainland China; three each from Australia, India and Japan; two from Singapore; and one from Indonesia.