Mechelany Advisors'CHINA BANKS PORTFOLIO was launched on August 1, 2021 to capitalise on what Mechelany Advisors' sees as a MAJOR SECULAR ENTRY POINT in some of China's Banking Giants. The portfolio is structured with a leverage of 2 x to capitalise oCn a 8 % gross dividend yield, giving investors net 15.8 % Dividend yield and benefit from a strong potential for long term capital appreciation due to the exceptional value these stocks offer at the moment.
Chinese Banks Have Bottomed out
The Chinese financial and real estate sectors were hammered down this year and the recent travails of Evergrande led investors to rush for the exits.
For a couple of weeks, significant concerns were voiced about the resilience of China’s real estate sector and the exposure of the banking system to the sector.
As we highlighted very early on, China’s handling of the Evergrande crisis was a balancing act between avoiding social, clients and suppliers and collateral damages, while not providing a blank check to investors in the company’s equities and bonds.
Those concerns have now vanished and the financial markets have now realised that the contagion effects of Evergrande’s demise will be limited and that the health of the Banking sector is not in danger.
As a result, Chinese banks bounced back very strongly last week and the Mechelany Advisors’ CHINA BANKS PORTFOLIO jumped + 6.83 % last week, for a performance of + 1.37 % since launch two months ago.
CHINA BANKS PORTFOLIO
The recent sell-off has more than reflected dismal prospects for the financial sector while we see the People’s Bank of China engaging in significant easing of monetary policy and encouraging banks to lend more to the economy
Now that the storm has passed, we see current levels as a great opportunity for long term investors to accumulate Chinese banks, lock-in high yields and benefit from a strong capital appreciation potential in the fourth quarter of 2021.
Chinese banks are trading at historically low P/Es of less than 4, dividend yields in excess of 8 % and Earnings yields above 20 %.
This is a very rare occurence that provides a unique opportunity to invest for the long term in the world’s largest banks.
Our Mechelany Advisors’ CHINA BANKS PORTFOLIO uses a leverage of 1 to 1, with a borrowing cost at 1 %, leaving investors with a 15.8 % gross dividend yield per annum.
We expect the individual banks included in our portfolio to increase by 25 to 30 % in value in the coming 6 months.
That will leave our portfolio with a 50 to 60 % capital gain on top of the 15.8 % dividend Yield.
We highlight below the description and charts of the six banks we have included in our portfolio
ICBC 1398 HK
China Construction Bank 939 HK
Bank of China 3988 HK
Agricultural Bank of China 1288 HK
China MinSheng Bank 1988 HK
Bank of Communication 3328 HK
EFG Mechelany CHINA BANKS Index Tracker
Investors can invest conveniently in the Index Tracker that was launched by EFG on our CHINA BANKS PORTFOLIO using the following ISIN Number
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