Core Viewpoint - The modification of CIPS rules is expected to accelerate the internationalization of the RMB, benefiting banks' cross-border business expansion [1][5] Summary by Sections Bank Sector Performance - The banking sector outperformed the market with a 3.77% increase, while the CSI 300 index rose by 1.54%. The performance of different types of banks includes: state-owned banks (+2.76%), joint-stock banks (+4.41%), city commercial banks (+4.01%), and rural commercial banks (+2.47%). Notably, 41 listed banks saw their stock prices rise, with Zhejiang Commercial Bank (+7.92%), Shanghai Pudong Development Bank (+7.6%), and Shanghai Bank (+7.53%) leading the gains. As of July 4, the banking sector's price-to-book (PB) ratio was 0.70, and the dividend yield was 5.65% [2] CIPS Rule Revision - On July 6, the People's Bank of China (PBOC) solicited opinions on the draft of the revised CIPS business rules. The main focus of the revision is to improve the management mechanism for participants and set only principle-based requirements for their business behaviors. This revision is expected to further promote the internationalization of the RMB and support the development of banks' cross-border business. The optimization of business rules is seen as necessary and forward-looking, enhancing the attractiveness of CIPS and increasing the international influence of the RMB [3] Investment Opportunities in the Banking Sector - The banking index reached a closing price of 4603.91 on July 4, marking a nearly 10-year high, with a weekly increase of 3.77%. Three key investment opportunities are identified: 1. The low interest rate environment continues to attract medium to long-term funds, with insurance capital increasingly investing in bank stocks. For instance, Ping An Life increased its stake in Postal Savings Bank of China H-shares to 13% as of June 30. The stable dividend yield of banks is expected to outperform bonds and wealth management returns [4] 2. The low allocation of public funds and the expansion of broad-based indices are expected to bring incremental capital inflows, benefiting quality regional banks significantly [4] 3. The acceleration of convertible bond conversions among small and medium-sized banks is anticipated to provide short-term opportunities, as seen with Qilu Bank announcing early redemption of its convertible bonds [4] Investment Recommendation - The modification of CIPS rules is expected to enhance the internationalization of the RMB and benefit banks' cross-border business. The acceleration of convertible bond conversions among small and medium-sized banks is likely to strengthen their capital base. The growth of medium to long-term funds and the potential recovery of public fund allocations are expected to reshape bank valuations positively. The company maintains a positive outlook on the banking sector's allocation value and continues to recommend investment in this area [5]

Group 1 - Multiple bank stocks have reached historical highs again, with several stocks continuously setting new records since the beginning of the second half of 2025 [1] - The banking sector has benefited from high dividend investment trends, with long-term funds entering the market and frequently increasing stakes in listed banks [1] - Analysts suggest that the core driver of bank valuation restructuring is the influx of incremental funds, primarily driven by policies such as increased long-term fund participation and significant purchases by index funds [1] Group 2 - CICC maintains a positive outlook on both relative and absolute returns for banks, noting that H-shares outperform A-shares due to higher dividend attractiveness for insurance funds [2] - Ping An Securities indicates that the stability of core businesses is expected to support the overall fundamentals of banks, with positive signals from interest margin business and funding costs [2] - The average dividend yield for the banking sector is currently at 4.01%, and regulatory measures to guide long-term funds into the market are expected to sustain the attractiveness of dividend investment [2]

Group 1 - The China Banking Index (399986) has seen a strong increase of 2.24%, with notable gains from component stocks such as Industrial Bank (601166) up 3.78%, Shanghai Pudong Development Bank (600000) up 3.38%, and China Everbright Bank (601818) up 3.29% [1] - The trend of increasing capital strength through the issuance of convertible bonds and financial bonds is becoming common in the banking industry, as evidenced by the approval for Baoding Bank to increase its registered capital by 710 million yuan, from 5.27 billion yuan to 5.98 billion yuan [1] - China Galaxy Securities indicates that the monetary policy is expected to maintain a moderately loose tone, with room for further interest rate cuts, supporting the stability of interest margins and the accumulation of positive factors for bank fundamentals [1] Group 2 - The Bank ETF Index closely tracks the China Banking Index and serves as an analytical tool for investors, categorizing the China All Share Index samples into various industry classifications [2] - As of June 30, 2025, the top ten weighted stocks in the China Banking Index include China Merchants Bank (600036), Industrial Bank (601166), and Industrial and Commercial Bank of China (601398), collectively accounting for 65.64% of the index [2]

Group 1 - The banking sector has shown resilience with a continuous upward trend, marking the third consecutive day of gains following a brief correction [1] - The banking sector index has achieved a cumulative increase of 13.1% in the first half of the year, outperforming the CSI 300 index by 13.07 percentage points, making it the second-best performing sector [2] - As of June 30, the total market capitalization of the A-share banking sector reached 15.44 trillion yuan, accounting for 14.74% of the total market capitalization of listed companies, with an increase of approximately 1.87 trillion yuan since the beginning of the year [2] Group 2 - The current market dynamics for the banking sector differ from those in 2023 and 2024, with a shift from dividend-driven logic to a focus on policy-driven capital inflows as the main driver for valuation restructuring [2] - The demand for high-dividend assets, represented by banks, is expected to rise, supported by the relatively high cost of insurance liabilities compared to most financial asset yields [2] - The banking sector's dividend yield reached 5.13% as of June 30, indicating sustained attractiveness for dividend allocation [3] Group 3 - The bank ETF (512800) has seen a significant increase in scale, surpassing 12 billion yuan, with an average daily trading volume of 410 million yuan over the past year, making it the largest and most liquid bank ETF in the market [3] - Investors interested in the banking sector's cost-performance ratio can consider the bank ETF (512800) and its associated funds [3]