Hong Kong Stock Concept Tracking | Financial “Living Water” Stimulates Consumption Potential The profit center of the consumer finance industry is expected to stabilize and improve (with concept stocks)

The Zhitong Finance App learned that in recent years, consumer finance services have played a positive role in boosting consumer desire and expanding consumer demand. As consumer loan investment intensifies, the importance of safeguarding the quality of loans has become more prominent. Efforts can be made to optimize product design and provide convenient services to better meet long-term and large consumer needs. The CITIC Construction Investment Research Report suggests that under the policy framework of expanding domestic demand and boosting consumption, the profit center of the consumer finance industry is expected to maintain steady growth as risk performance improves due to macroeconomic recovery, combined with optimization of customer acquisition and financing costs. Related targets: Lexin (LX.US), Zhongan Online (06060), 360 Mathematics (03660), and Lujin Holdings (06623).

As an important bridge between financial resources and consumer demand, consumer finance has been given a key role in strategies to expand domestic demand. The functional position of consumer finance institutions is very clear, that is, to provide retail financial consumers with credit services for consumption. Currently, a multi-level support system has been formed at the policy level. For example, monetary policy creates a relaxed environment through interest rate cuts; fiscal policy directly stimulates consumption through subsidies; optimization of regulatory policies creates conditions for the development of consumer finance; and industrial policy is committed to creating new consumption scenarios.

The “Special Action Plan to Boost Consumption” issued earlier proposes to strengthen credit support. Encourage financial institutions to increase investment in personal consumer loans on the premise that risks are manageable, and set reasonable consumer loan amounts, terms, and interest rates. Support financial institutions to optimize repayment methods for personal consumption loans in accordance with the principles of market-based legalization, and carry out loan renewal work in an orderly manner.

On March 14, the General Administration of Financial Supervision issued a notice to propose specific measures to optimize consumer finance policies to help boost consumption, starting from enriching financial products, facilitating financial services, and creating a good consumption environment. Banking financial institutions are also encouraged to increase investment in personal consumer loans on the premise that risks are manageable, set reasonable consumer loan amounts, terms, and interest rates, and optimize resource allocation.

The central bank also recently made it clear that it will “study and issue special documents to support the expansion of financial consumption” to strengthen collaboration between finance, finance, and industrial policies to meet diversified capital needs from both the supply and demand sides of consumption. This policy framework embodies the idea of a “macroeconomic policy combo punch,” which aims to break the bottlenecks that limit consumption growth through multi-policy coordination.

Since 2017, consumer financial institutions have continued to expand the benefits of inclusive finance, accurately benefiting a wider range of customers. The total number of customers served increased from 56.91 million to 370 million in 2023, with a compound annual growth rate of 36.62%. In 2023 alone, consumer financial institutions added 81.67 million new customers in the county, bringing the total number of customers to 185 million.

It is worth noting that in the context of continuous optimization of regulatory policies, consumer finance companies' efforts to dispose of non-performing assets have increased significantly in recent years. Compared with previous years, recent bad loans transferred by consumer finance companies have shown new characteristics such as shorter overdue times and lower pricing.

Behind a number of consumer finance companies speeding up the clearance of non-performing asset packages is the industry's collective adjustment of market expectations. Previously, the contract period for bad assets transferred on the market was usually over 180 days, which is usually 2 to 3 years. But now, as the market fluctuates, consumer finance companies are more willing to “go to battle lightly” and throw away their burdens immediately. In particular, packaging and publishing non-performing loans before they are written off can help relieve bad pressure and reduce the pressure to write off provisions.

Dong Ximiao, chief researcher at CMB, pointed out earlier that the assets of consumer finance companies are mainly personal consumption loans, and most consumer finance companies do not have the ability to dispose of non-performing assets on a large scale, so they are also relatively advanced in terms of the scale of outstanding principal and interest transactions throughout the year. Bulk transfers help consumer finance companies reduce ineffective capital use, free up more resources to promote consumption and expand domestic demand.

The CITIC Construction Investment Securities Research Report mentioned that under the policy framework of expanding domestic demand and boosting consumption, measures such as “increasing the supply of consumer finance, optimizing loan management, innovating digital and scenario-based products, and carrying out personal loan relief” strengthen collaboration between consumer finance and financial subsidies, and promote the decline in payment facilitation and financial inclusion, and ultimately achieve a dynamic balance between financial resource allocation efficiency and consumer consumption upgrade needs. As macroeconomic recovery brings about improved risk performance, combined with customer acquisition and optimization of financing costs, the industry's profit center is expected to maintain steady growth.

Regulatory trends combine promoting development and strict supervision, optimizing risk management and control indicators, improving market exit mechanisms, and strengthening collaboration between consumer rights protection and technology applications. A full-chain supervision system covering institutional entry, business compliance, and credit reporting management has been formed. Under normalized supervision, the dynamic balance between asset quality and capital efficiency has become a core variable in the development of the industry.

Related concept stocks:

Lexin (LX.US): Lexin is a leading fintech platform in China that focuses on providing convenient consumer finance services to young consumers. Its core product, “Installment Music”, provides online payment installment and credit loan services, covering various scenarios such as 3C digital, education, and travel, and realizes virtual credit card functions through the “Lehua Card” to meet users' flexible spending needs.

Zhongan Online (06060): Zhongan Online is the first Internet insurance company in China. It was founded by the three giants of Ant Group, Tencent, and Ping An Group. As a pioneer in insurance technology that operates exclusively online, Zhongan has “technology-driven finance” as its core. Its business covers various fields such as health insurance, digital life insurance, consumer finance insurance, etc., and is particularly famous for innovative products such as return shipping insurance and million medical insurance.

360 Digital (03660): 360 Digital is a leading fintech platform in China. Formerly known as 360 Finance, it relies on 360 Group's traffic and technical advantages to focus on providing intelligent credit services to financial institutions and consumers. With “technology empowers finance” as the core, the company connects loan users with licensed institutions such as banks and trusts through big data risk control and AI technology, focusing on safe and efficient financial inclusion solutions.

Lujin Holdings (06623): A fintech platform owned by Ping An Group. The original P2P business was transformed into a loan aid model to provide asset matching services for banks and consumer finance companies. Relying on the strong resources of Ping An Ecology, it has built a two-wheel drive model: on the one hand, it provides intelligent credit services to small and micro enterprises and individuals through “Ping An Inclusive”, and on the other hand, it creates a one-stop wealth management platform. Currently, it is focusing on small and micro enterprise finance, high-net-worth customer service, and overseas market expansion, and continues to evolve into a “safer and smarter” comprehensive financial service platform.