HUAXI Securities·2025-06-12 00:20Investment Rating - The report maintains a positive outlook on bank stocks, suggesting a "Buy" rating for the sector, with expectations that bank stocks will outperform the Shanghai Composite Index by 15% or more within the next six months [86]. Core Viewpoints - The current rally in bank stocks is primarily driven by state-owned capital, with significant investments from central financial institutions and a shift in foreign capital's stance towards net inflows [30][12]. - The report emphasizes the importance of state-owned capital in stabilizing the banking sector and preventing systemic risks, as well as the potential for bank stocks to provide stable returns for investors seeking income [34][39]. - The anticipated recovery in bank stock valuations is supported by improved asset quality due to policies aimed at stabilizing the housing market and addressing local government debt [60][62]. Summary by Sections 1. State-Owned Capital as the Engine of Bank Stock Rally - The rally began with state-owned banks leading the market, followed by a broader participation from various types of banks in 2024 and 2025 [10][31]. - In 2023, net inflows from ETFs, state-owned capital, and financing funds were significant, while foreign and insurance funds experienced net outflows [12][30]. 2. Restructuring Logic of Equity Finance - The report highlights that state-owned capital's investment in bank stocks serves to stabilize financial markets and provide a reliable income source amid declining land transfer revenues [42][44]. - Bank stocks are viewed as a safe investment due to their high dividend yields and stable performance, with many banks offering yields above 4% compared to lower yields on government bonds [42][44]. 3. Funding Landscape - Long-term Capital as a Stabilizing Force - The report anticipates that insurance and public funds will continue to support bank stocks, with a focus on long-term liquidity [47][51]. - Insurance funds are expected to increase their allocation to bank stocks due to regulatory changes and the need for higher returns in a low-interest-rate environment [51][54]. 4. Fundamental Improvements - Policies aimed at stabilizing the housing market and addressing local government debt are expected to enhance the asset quality of banks, leading to a revaluation of bank stocks [60][62]. - The introduction of new credit tools and technological advancements are seen as catalysts for further growth in the banking sector [60][66]. 5. Policy Environment - Interest Margins Expected to Rebound - The report notes that recent asymmetric interest rate cuts signal a turning point in the excessive benefits provided to the real economy, suggesting a potential rebound in interest margins [70][73]. - Regulatory oversight is focused on maintaining the health of the banking sector while balancing support for economic growth [73]. 6. Investment Recommendations - The report recommends focusing on bank stocks with high dividend yields and strong growth potential, particularly those with robust operational efficiency [80]. - Specific banks highlighted as beneficiaries include China Merchants Bank, Changshu Bank, Chengdu Bank, and Hangzhou Bank [80].