Core Viewpoint - The recent significant drop in bill discount rates indicates a potential weakening in credit demand, with the 6-month bill discount rate falling to a historical low of 0.2% [1] Group 1: Market Trends - On July 30, the bill discount rates experienced a sharp decline, with the maximum drop reaching 50 basis points (BP) [1] - The 3-month and 6-month bill varieties rebounded in the afternoon, with increases of over 20 BP [1] Group 2: Credit Demand Indicators - The decline in bill rates is viewed as a leading indicator of credit issuance sentiment, suggesting weaker credit demand [1] - July is traditionally a "small month" for credit issuance, and a seasonal decline in credit allocation is expected [1] Group 3: Market Dynamics - The bill market's function as a credit "barometer" has weakened this year due to short-term lending surges, leading to reduced demand for bills [1] - Changes in supply chain payment terms in certain industries have reinforced the substitution effect, impacting bill rates [1]

Investment Rating - The industry investment rating is "In line with the market" and the rating has been maintained [3][24]. Core Insights - Financing demand has shown signs of recovery, with a significant rebound in M1 growth. The June financial data indicates an increase in both loans and deposits, reflecting improved liquidity conditions and a recovery in credit demand [6][21]. - The report highlights that the increase in short-term loans for enterprises and the weak recovery in household loans are notable trends. The overall credit environment is improving, supported by fiscal measures [11][24]. Summary by Sections Financial Data Overview - As of the end of June 2025, the balance of RMB loans reached 268.56 trillion yuan, with a year-on-year growth of 7.06%. In June, RMB loans increased by 2.24 trillion yuan, which is 110 billion yuan more than the previous year [7][11]. - The balance of short-term loans was 67.94 trillion yuan, with a growth rate of 6.28%, while the balance of medium to long-term loans was 179.18 trillion yuan, growing at 6.76% [7][11]. Loan Composition - In June, household loans increased by 597.6 billion yuan, with short-term loans at 262.1 billion yuan and medium to long-term loans at 335.3 billion yuan. This indicates a slight recovery in household financing demand [11][24]. - Corporate loans saw a significant increase, with new loans amounting to 1.77 trillion yuan, including 1.16 trillion yuan in short-term loans, reflecting improved business operations and reduced trade tensions [11][24]. Monetary Supply and M1 Growth - M2 growth rate was 8.3% in June, while M1 growth rate rebounded to 4.6%, an increase of 2.3 percentage points from the previous month. This rebound is attributed to the low base effect from last year [18][21]. - The report notes that the increase in M1 is indicative of a recovery in liquidity, with significant contributions from both household and corporate deposits [16][18]. Investment Recommendations - The report suggests that the recent increase in new credit and improved monetary supply indicate a marginal improvement in the liquidity environment. It recommends focusing on large banks with sufficient provisions and stable profitability as the earnings disclosure period approaches [21][24]. - The emphasis is placed on the long-term investment potential of the banking sector, particularly in light of new regulations encouraging stable investments from insurance companies [24].

Core Insights - Hong Kong consumers exhibit a cautious financial outlook amid a complex economic environment, employing a dual strategy of prudent short-term spending control and long-term financial planning to enhance financial resilience [1][3] Consumer Sentiment - In Q2 2025, 44% of surveyed Hong Kong consumers reported an increase in income over the past three months, a significant rise from 29% year-on-year, with Generation Z showing the highest increase at 56%, up 11 percentage points from the previous year [1][2] - Despite the income increase, 52% of consumers expect their income to remain stable or decrease over the next 12 months, reflecting diminished confidence in future income growth [1][2] Financial Concerns - Key concerns affecting household financial situations over the next six months include inflation of daily necessities (57%) and employment prospects (54%), linked to rising inflation rates and increasing unemployment since February [2] - Approximately 24% of consumers worry about their ability to pay at least one current bill or loan, an increase from 20% the previous year [2] Spending Adjustments - To cope with financial instability, 39% of consumers have reduced discretionary spending on dining out and travel, while another 39% have increased emergency fund savings, 25% have boosted retirement savings, and 20% have accelerated debt repayment [2][3] Market Outlook - Despite ongoing challenges, positive signals in the Hong Kong market include increased activity in the real estate sector and a recovery in the stock market driven by new IPOs [2] - Interest rates in Hong Kong are expected to remain low, with market expectations of further interest rate cuts in the US by the second half of 2025 [2]

Group 1: Report Industry Investment Rating - No specific industry investment rating is provided in the report. Group 2: Core Viewpoints - The economic negative cycle of "housing price slump, stock market slump - wealth shrinkage - consumption downgrade" in the past two years has ended. Despite unfavorable factors such as the weak real - estate market, the economy is expected to stabilize. The interest - rate bonds may have a narrow - range and phased oscillation, and there is a positive view on long - duration credit bonds with a yield of over 2%. It is recommended to conduct band operations on interest - rate bonds by closely monitoring the capital situation and defend once the capital tightens. Since early June, there has been a continuous positive view on long - duration sinking urban investment bonds, capital bonds, and insurance sub - debt, and strong recommendations have been made for long - duration capital bonds of Minsheng, Bohai, and Hengfeng. Attention should also be paid to investment opportunities in Hong Kong - listed bank stocks and China Property Insurance's capital - supplementing bonds [3]. Group 3: Summary by Related Catalogs 1. Financial Data in June 2025 - On the afternoon of July 14, the central bank disclosed the financial data for June 2025: new loans reached 2.24 trillion yuan, and social financing was 4.2 trillion yuan. At the end of June, M2 reached 330.3 trillion yuan, a year - on - year increase of 8.3%; M1 increased by 4.6% year - on - year; and the social financing growth rate was 8.9% [1]. 2. New Loans in June 2025 - New loans in June increased slightly year - on - year, which may be related to banks' efforts to boost credit scale. Generally, April and May in the second quarter are off - peak months for credit delivery, while June is a peak month. The credit data in the first half of the year was affected by the replacement of implicit debts. The low stock mortgage interest rate and the stable stock market alleviated the pressure of early mortgage repayment. However, the significant reduction in deposit interest rates may exacerbate the pressure of early mortgage repayment. In June, individual loans increased by 59.76 billion yuan, including a 26.21 - billion - yuan increase in short - term individual loans and a 33.53 - billion - yuan increase in medium - and long - term individual loans, with a slight year - on - year increase. In June, short - term corporate loans increased by 1.16 trillion yuan, medium - and long - term corporate loans increased by 1.01 trillion yuan, and bill financing decreased by 410.9 billion yuan. Due to issues such as low capacity utilization in the manufacturing industry, weak real - estate investment, and limited infrastructure investment space, credit demand may be weak in the long term. After banks boosted credit scale in June, new loans in July are expected to be low [3]. 3. M2 and M1 Growth Rates in June 2025 - Both the M2 and M1 growth rates rebounded in June. Since January 2025, the central bank has adopted a new M1 caliber, which further includes individual current deposits and non - bank payment institution customer reserves on the basis of the previous M1. As of the end of June 2025, the balance of the new - caliber M1 reached 113.95 trillion yuan. In recent years, the year - on - year growth rate trends of the old and new M1 calibers have been similar, but the new - caliber M1 growth rate trend is more stable. In June, the new - caliber M1 growth rate was 4.6%, a 2.3 - percentage - point increase from the previous month. Since the fourth quarter of 2024, the growth rates of both the old and new M1 calibers have significantly rebounded, indicating an improvement in economic activity. In June, the M2 growth rate was 8.3%, a 0.4 - percentage - point increase from the previous month [3]. 4. Social Financing in June 2025 - Social financing increased significantly year - on - year in June. The social financing increment in June was 4.2 trillion yuan, a year - on - year increase of 0.9 trillion yuan. The increase mainly came from government bonds and credit. In June, the increment of RMB loans to the real economy was 2.36 trillion yuan, a year - on - year increase of 0.17 trillion yuan; the undiscounted bank acceptance bills decreased by 190 billion yuan; the net corporate bond financing was 241.3 billion yuan; and the net government bond financing was 1.35 trillion yuan, a year - on - year increase of 0.5 trillion yuan. At the end of June, the social financing growth rate was 8.9%, up 0.2 percentage points from the end of the previous month and 0.9 percentage points from the beginning of the year. Looking forward to 2025, it is expected that new loans will increase slightly year - on - year, the net government bond financing will expand significantly year - on - year, social financing will increase significantly year - on - year, the social financing growth rate may first rise and then fall, and the social financing growth rate at the end of the year may reach around 8.3% [3].

Report Summary 1. Report Industry Investment Rating - No industry investment rating is provided in the report. 2. Core Viewpoints - The market's expectation of the capital market is marginally cautious, as indicated by the upward movement of certificate of deposit (CD) yields and interest rate swaps (IRS) [2]. - The repo trading volume increased, while the lending scale of large - scale banks decreased, and the lending scale of money market funds increased [3]. - The bill rate decreased, indicating a decrease in credit demand and an increase in bill - padding demand, with general credit demand expected in July. The USD/CNY exchange rate increased, and the Sino - US interest rate spread widened [4]. - The capital market is expected to remain balanced this week, but capital interest rate fluctuations may increase [5]. 3. Summary by Content 3.1 Certificate of Deposit and Interest Rate Swap - Last week, the total maturity of CDs was 510.52 billion yuan, and the issuance was 427.13 billion yuan, with a net financing scale of - 83.39 billion yuan. As of the last trading day of last week, the 1 - year AAA CD maturity yield was 1.63%, up from the previous week. This week, the single - week maturity scale of CDs is about 802.81 billion yuan, with greater maturity pressure than the previous week [2]. - In terms of interest rate swaps, the average value of the 1 - year FR007 interest rate swap last week was 1.53%, up from the previous week [2]. 3.2 Repo Market - Last week, the pledged repo trading volume was between 7.7 trillion and 8.6 trillion yuan. The average trading volume of R001 repos was 7,355.9 billion yuan, an increase of 545 billion yuan from the previous week. As of the last trading day of last week, the outstanding repo balance was 11.8 trillion yuan, down from the previous week [3]. - By institution, the lending scale of large - scale banks decreased, and the lending scale of money market funds increased. The borrowing scales of securities firms, funds, and wealth management products decreased. As of Friday, the repo balances of large - scale banks and money market funds were 4.89 trillion yuan and 2.12 trillion yuan, down 694.7 billion yuan and up 48.8 billion yuan from the previous week respectively. The positive repo balances of securities firms, funds, and wealth management products were 1.79 trillion yuan, 2.29 trillion yuan, and 704 billion yuan, down 78.5 billion yuan, 150.3 billion yuan, and 140.5 billion yuan from the previous week respectively [3]. 3.3 Bill and Exchange Rate - Last Friday, the 6M national stock bill transfer quotation was 0.89%, down from the last trading day of the previous week. The decrease in the bill rate indicates a decrease in credit demand and an increase in bill - padding demand, with general credit demand expected in July [4]. - Last Friday, the USD/CNY exchange rate was 7.17, slightly up from the previous week, and the Sino - US interest rate spread widened. The strong US non - farm payrolls data in June led to a decline in the expectation of the Fed's interest rate cut, and the increase in short - term supply pressure after the debt ceiling increase pushed up US Treasury yields [4]. 3.4 This Week's Focus - This week, 525.7 billion yuan of open - market funds will mature, including 425.7 billion yuan of reverse repos and 100 billion yuan of MLFs [5]. - China's June trade data will be released on Monday, and the performance of imports and exports will be monitored. China's June and Q2 economic data will be released on Tuesday, and the domestic fundamental performance will be monitored. The US June CPI and PPI data will be released on Tuesday and Wednesday respectively, and the US inflation performance will be monitored. June's financial data may be released this week, and the performance of credit and social financing will be monitored. Tuesday is the tax payment deadline, and the central bank's hedging efforts and capital market disturbances will be monitored [5].

Investment Rating - The industry investment rating is "Positive" for the banking sector, indicating an expectation of performance that exceeds the market benchmark by more than 5% over the next six months [24]. Core Insights - The growth of social financing (社融) in May was primarily supported by proactive fiscal policies, with a year-on-year increase of 8.7% in outstanding social financing [1][2]. - Credit demand remains weak, with a notable decline in new loans compared to previous months, particularly in corporate loans [2][3]. - The issuance of government bonds has been front-loaded, contributing significantly to the increase in social financing, with net financing of government bonds reaching 1.46 trillion yuan in May [2]. - The overall loan growth rate is at 7.1%, reflecting a slight decrease from the previous month, and the total new loans for May amounted to 620 billion yuan [1][2]. - The banking sector is expected to maintain stable growth in scale due to the issuance of long-term special government bonds and a shift in local government focus towards economic recovery [8][9]. Summary by Sections Social Financing and Credit - In May, social financing increased by 2.29 trillion yuan year-on-year, mainly driven by government bond issuance [2]. - Corporate loans showed a mixed performance, with short-term loans increasing while medium to long-term loans decreased due to debt replacement impacts [3]. - The total new loans for May were 620 billion yuan, down 330 billion yuan year-on-year, with a cumulative total of 1.07 trillion yuan for the first five months, reflecting a decrease of 460 billion yuan year-on-year [2][3]. Deposits and Monetary Supply - M2 increased by 7.9% year-on-year, while M1 saw a year-on-year growth of 2.3%, significantly influenced by a low base from the previous year [4]. - New deposits in May reached 2.18 trillion yuan, an increase of 500 billion yuan year-on-year, with notable contributions from non-bank and fiscal deposits [4][19]. Interest Rates and Profitability - The average interest rate for new corporate loans remained stable at approximately 3.2%, while personal housing loans also held steady at around 3.1% [3][15]. - The banking sector is expected to experience manageable pressure on net interest income due to declining loan rates and adjustments in deposit rates [8][9].

Core Viewpoint - The financial data for May 2025 indicates mixed signals for the banking sector, with M1 growth showing signs of economic vitality, while overall credit growth remains below seasonal levels, suggesting potential for improvement in the banking industry [1][2]. Group 1: Financial Data Analysis - In May 2025, the social financing growth rate remained flat, while M2 growth slightly decreased and M1 growth increased by 0.8 percentage points, indicating a positive signal for economic vitality [1]. - The M1 increment for May 2025 was a decrease of 0.23 trillion, compared to a net decrease of 1.08 trillion in May 2024, and an increase of 0.41 trillion in May 2023, with the average from 2019 to 2023 being 0.80 trillion [1]. - The credit growth for May 2025 was 0.62 trillion, down from 0.95 trillion in May 2024 and 1.36 trillion in May 2023, with a historical average of 1.48 trillion from 2019 to 2023, indicating that credit growth has not yet returned to seasonal levels [2]. Group 2: Economic Implications - The real credit demand, as reflected by social financing excluding bill financing, showed an increase of 0.06 trillion year-on-year, suggesting that real credit demand has not weakened further [2]. - The banking sector is expected to benefit from monetary and fiscal policies aimed at enhancing economic circulation, particularly if fiscal measures focus more on subsidies for livelihood areas such as education and child-rearing [2]. - The upcoming Lujiazui Forum (June 18-19, 2025) is anticipated to be a platform for the release of significant financial policies, which could impact the banking sector positively [3].

Group 1: Report Investment Rating - No industry investment rating is provided in the report. Group 2: Core Viewpoints - The credit demand is weak, but the growth rate of social financing is stable. The new loans in May 2025 decreased year-on-year, reflecting weak credit demand and the impact of implicit debt replacement. The growth rate of M2 was stable month-on-month, and the growth rate of M1 rebounded. The social financing in May increased year-on-year, and the growth rate of social financing was stable. It is expected that the new loans in 2025 will increase slightly year-on-year, the net financing of government bonds will expand significantly year-on-year, the social financing will increase significantly year-on-year, and the growth rate of social financing may rise first and then fall, with an estimated year-end growth rate of about 8.3%. Interest rate bonds may experience narrow fluctuations in stages, and 5Y credit bonds with a yield of more than 2% are favored [1][2]. Group 3: Summary by Relevant Catalog Credit Demand Analysis - In May 2025, the new loans decreased year-on-year, reflecting weak credit demand and the impact of implicit debt replacement. The new individual loans were +540 million, including -208 million in short-term individual loans and +746 million in medium - and long - term individual loans, with a slight year-on-year increase. The new short - term corporate loans were +1.1 billion, the new medium - and long - term corporate loans were +3.3 billion, and the bill financing was +746 million. Due to low capacity utilization in manufacturing, weak real estate investment, and limited infrastructure investment space, credit demand may be weak in the long term [2]. M1 and M2 Analysis - Since January 2025, the central bank has adopted a new M1 caliber, which further includes personal current deposits and customer reserves of non - bank payment institutions on the basis of the previous M1. As of the end of May 2025, the balance of the new - caliber M1 reached 108.9 trillion yuan. In May, the growth rate of the new - caliber M1 was 2.3%, a month - on - month increase of 0.8 percentage points, and the growth rate of M2 was 7.9%, a month - on - month decrease of 0.1 percentage points. The growth rates of both the new and old M1 calibers have significantly rebounded since Q4 2024, reflecting an improvement in economic activity [2]. Social Financing Analysis - In May 2025, the social financing increment was 2.29 trillion yuan, a significant year - on - year increase of 0.22 trillion yuan, mainly from the net financing of government bonds and corporate bonds. The increment of RMB loans to the real economy was 59.6 billion yuan, a year - on - year decrease of 22.37 billion yuan; the undiscounted bank acceptance bills were - 11.62 billion yuan; the net financing of corporate bonds was +14.96 billion yuan; the net financing of government bonds was 1.46 trillion yuan, a year - on - year increase of 23.67 billion yuan. The growth rate of social financing at the end of May was 8.7%, the same as at the end of the previous month and 0.7 percentage points higher than at the beginning of the year [2]. Bond Investment Suggestion - Interest rate bonds may experience narrow fluctuations in stages, and 5Y credit bonds with a yield of more than 2% are favored. The reduction of long - term time deposit interest rates of major banks in May 2025 is beneficial to credit bonds. The reduction of deposit interest rates is expected to promote the growth of wealth management scale, and the wealth management scale may increase significantly in July, further compressing credit spreads. In 2025, bond market investment needs to be cautious, and attention should be paid to stock and convertible bond investment opportunities and Hong Kong - listed bank stocks [2].

Investment Rating - The report maintains a positive outlook on the banking sector, indicating potential for absolute and relative returns in the short, medium, and long term [2][3]. Core Insights - The M1 growth rate has rebounded, signaling economic vitality, although it remains below seasonal norms. The increase in M1 is primarily attributed to a low base effect from the previous year [1][2]. - Credit growth in May was 0.62 trillion, which is lower than the seasonal average, but the real credit demand appears stable as indicated by the increase in non-bill financing [1][2]. - The fiscal strength indicator has shown a significant decline, suggesting a need to monitor the sustainability of fiscal efforts moving forward [2]. Summary by Sections Financial Data Analysis - M1 growth increased by 0.8 percentage points, with a monthly decrease of 0.23 trillion in May 2025, compared to a net decrease of 1.08 trillion in May 2024 [1]. - Total credit increased by 0.62 trillion in May 2025, lower than the 0.95 trillion in May 2024 and 1.36 trillion in May 2023, indicating that credit growth has not yet returned to seasonal levels [1]. Economic Outlook - The report emphasizes that while M1 and credit indicators show no further weakening in economic vitality, they have not yet returned to normal seasonal levels. Future attention should be given to the sustainability of fiscal efforts and the liquidity effects following large bank capital injections [2]. - The banking sector is expected to benefit from structural optimization and increased fiscal support directed towards social welfare areas, which could enhance both short-term demand and long-term supply [2][3]. Investment Recommendations - The report suggests a balanced investment approach across state-owned, joint-stock, and regional banks, focusing on those with superior free cash flow valuations [3]. - It highlights that high-dividend banks are likely to outperform in relative returns due to their defensive advantages amid external uncertainties [3].

Investment Rating - The industry investment rating is "Recommended," indicating an expected increase in the industry index by more than 5% over the next 3-6 months compared to the benchmark index [26]. Core Insights - The report highlights a significant increase in social financing, with April 2025 seeing a new social financing scale of 1.16 trillion yuan, which is an increase of 1.22 trillion yuan year-on-year, resulting in a year-on-year growth rate of 8.7%, the highest monthly growth rate in nearly a year [2][7]. - The report notes a decline in credit demand, particularly in corporate loans, which have decreased significantly after an initial surge, while household short-term loans are also under pressure [7][8]. - The report suggests that the banking sector is likely to see an increase in overall positioning, driven by medium to long-term capital inflows and public fund reforms, recommending a diversified investment strategy focusing on state-owned banks and quality regional banks [7][8]. Summary by Sections Social Financing Overview - In April 2025, the new social financing scale reached 1.16 trillion yuan, with a year-on-year increase of 1.22 trillion yuan, and a social financing stock growth rate of 8.7%, up 0.3 percentage points from the previous month [2][7]. - Direct financing saw a significant contribution from government bonds, which increased by 1.07 trillion yuan year-on-year, while corporate bonds improved slightly due to a low base effect [7][8]. Credit Data - New RMB loans in April amounted to 280 billion yuan, a decrease of 450 billion yuan year-on-year, primarily due to weakened corporate financing demand [7][8]. - Corporate loans decreased by 250 billion yuan year-on-year, with short-term loans and medium to long-term loans also showing declines [7][8]. Monetary Growth - M1 growth rate decreased to 1.5%, while M2 growth rate increased to 8% due to a low base effect from the previous year [7][8]. - The report indicates a significant reduction in both household and corporate deposits, with non-bank deposits increasing by 1.9 trillion yuan [7][8]. Investment Recommendations - The report emphasizes the importance of positioning in the banking sector, suggesting that banks with high dividend yields and strong asset quality should be prioritized for investment [7][8]. - It recommends focusing on state-owned banks and stable joint-stock banks, as well as regional banks with high provisioning coverage ratios [7][8].