The year 2015 has not been an easy one for the country home to the world’s number one economy. China has reported declining growth for the current year with the latest number estimated to be below 7% according to the third quarter’s official numbers. Among those hit hardest are Chinese bank stocks and manufacturers.
But this does not mean that everything in China will be taking a turn for the worse, at least not forever.
The first shock may have had an exaggerated effect taking a heavier toll on the outlook on the Chinese economy, especially having an impact on the stock market.
With that said, InvestAsian believes that after the initial drop, many players on the market will be making a swift recovery especially given that they hold strong fundamentals.
Any economy would not be fundamentally strong if not for its financial institutions that serve as its backbone. However, the companies in the limelight today are not the Chinese financial institutions themselves, but the players behind them.
Chinese Bank Stocks in the Backstage
Among the many behind the scene players found on the Chinese stock market, two companies stand out the most. Operating in the background, these two go hand in hand to make up a strong tag team with each playing in an area that the other doesn’t but absolutely requires.
The two Chinese bank stocks we’ll cover today are GRG Banking Equipment Co., Ltd. (SHE:002152) and Julong Corp (SHE:300202) – two strong performers that InvestAsian recommends.
If the two companies mentioned above are the brain and brawn of a two-man team, then Julong would be the brawn. A China-based company, Julong primarily deals with the research, development, manufacturing and distribution of financial machines.
Julong’s many product lines include, but are not limited to currency sorters, banknote strapping machines, currency counters, cash machines and other self-service machines. It’s customer base ranges from domestic commercial banks as well as corporations, both domestic and international.
Shares are currently being sold at 32.00 CNY, a shadow of its former price which was once peaked at 56.30.
Definitely not the biggest company in the market but one of the best, Julong boasts strong financial performance as well as sound fundamentals. Proudly featuring the highest operating metrics in this particular sector, Julong has 30.44% return on average equity, a whole 8% more than the closest competitor.
One of the biggest contributors to the leading ROI is Julong’s net profit margin of 32.59% which is also the industry’s best.
GRG Banking Equipment Co., Ltd.
The reason GRG is termed the brain in this tag team combo is because of its main product.
Another China-based company, GRG specializes in system software related to many of the banking industry’s machines. Their production of machines is few, with just automatic teller machines and automatic fare collection systems, but their manufacturing of system software is boundless.
Shares closed at 29.87 CNY, much less than a few months back when it peaked at 51.90 CNY.
The second biggest player in terms of market capitalization in this market, GRG is seen to be performing better than most.
With extremely high returns of over 20%, resulting from high profit margins of more than 25%, GRG is definitely one of the strongest performers in the financial institution service provider market right now.
The recent opening of the Hong Kong-Shanghai Stock Connect allows individual foreign investors to buy shares listed in mainland China for the first time. A brokerage account in Hong Kong is now more useful than ever, giving access to all companies on the Shanghai Stock Exchange including Julong and GRG.