HK Stock Market Move | DRCB (09889) surged more than 10% in the closing session, the trend of mergers and restructuring of small and medium-sized banks is becoming more pronounced, with further potential for bank valuation to increase.

DRCB(09889) rose more than 10% at the close, up 8.57% at the time of publication, at HK$3.8. On the news front, in recent years, the trend of mergers and reorganizations in small and medium-sized banks has been obvious, and has shown "explosive" development this year. Zhou Maohua, macro researcher at China Everbright Bank, pointed out that market-oriented and efficient mergers and reorganizations of small and medium-sized banks help to rationalize ownership structure, improve internal governance, accelerate the disposal of historical legacy issues and non-performing assets, allowing poorly managed and high-risk small banks to steadily "exit" the market, reducing systemic risks. At the same time, through mergers and reorganizations, resource allocation can be optimized and the quantity and quality of banks can be improved. Sealand points out that policy efforts to reduce debt and lower bank risk; measures to boost domestic demand may be introduced, and bank ROE is expected to improve after the implementation of advanced capital regulation methods. We believe that there is further room for the valuation of banks to increase and maintain a "recommended" rating for the banking industry.