(Yicai) Aug. 29 -- The market capitalization of China’s Big Six state-owned lenders has surpassed that of the Shenzhen Stock Exchange’s Nasdaq-style ChiNext Board, which boasts more than 1,300 firms, as investors lose their appetite for risk.

The combined market valuation of the Big Six, namely the Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of Communications, Bank of China, China Construction Bank as well as Postal Savings Bank of China, reached CNY8.7 trillion (USD1.2 trillion) yesterday, more than that of the ChiNext Board, which was just CNY8.68 trillion.

A risk averse sentiment has fueled this reversal in market caps as investors seek the safe haven of banking stocks, with their low valuations and high share dividends, and at the same time sell off growth stocks, which are company stocks that are expected to grow faster than the market average, whose price is slumping.

Investors have become more risk averse and are more inclined to choose stocks with low valuations, high share dividends and stable performance, such as bank stocks, Zhang Yi, chief executive and chief analyst of iiMedia Consulting, told Yicai.

The regulatory environment has also improved, which has helped support the rise in bank stocks, Zhang said. Bank stocks generally perform well although their shrinking net interest margin has caused some pressure in recent years, he added.

Bank stocks have surged 27.3 percent in value since the start of the year, while the index for the ChiNext Board has plunged 19 percent. The market cap of the Big Six has swelled 31 percent over the period, while that of the ChiNext Board has shrunk 23 percent.

The stocks of Agricultural Bank of China, Industrial and Commercial Bank of China and Bank of Communications have each gained more than 30 percent in value so far this year, while that of Bank of China has soared 27.7 percent, that of China Construction Bank has jumped 26.1 percent and that of Postal Savings Bank of China had advanced 18.3 percent.

Banks still have relatively low valuations, despite the recent gains, due to their low starting point. The average price-to-earnings ratio, which is the share price relative to the earnings per share, of bank stocks was 5.9:1 as of the close of markets yesterday, while the price-to-book ratio, which is its market value compared to its book value, was only 0.6, according to statistics from financial data provider Wind.

Bank stocks are likely to continue to be favored by investors because this risk-hedging sentiment is likely to last for some time, Zhang said. Growth stocks, on the other hand, have been tumbling for some time due to their previously high market valuations and poor business performance.

The 842 listed companies on Shenzhen’s ChiNext Board that have disclosed their respective first half financial data so far logged a combined 30 percent dive in net profit in the first half from a year earlier, while revenue plunged 27.2 percent, according to data from Choice.

Back in 2021, when growth stocks were all the rage, the average price-to-earnings ratio on the ChiNext Board once topped 60:1 and the price-to-book ratio was over 8:1, according to Choice.

As of yesterday, the ChiNext Board’s price-to-earnings ratio was 23.1:1 and the price-to-book ratio was 2.9:1, both of which are still much higher than the current average of bank stocks.

Editors: Tang Shihua, Kim Taylor