Core Insights - The report indicates that the banking sector is entering a favorable period for investment as the bull market atmosphere strengthens, suggesting a good opportunity for high-quality cyclical stocks [1][5][33] - Historical analysis shows that in previous bull markets, the banking sector typically experiences three phases: initial phase with moderate gains, mid-phase where growth sectors outperform, and a late phase where banks present the best investment opportunities with both absolute and excess returns [4][9][28] Market Performance Analysis - Since 2010, the banking sector has shown varying performance across three bull market cycles, with only the 2016-2018 cycle yielding excess returns for banks [6][9] - In the 2014-2015 bull market, the banking index rose by 96.8%, while the Shanghai Composite Index increased by 152.2% [6][10] - The 2016-2018 bull market saw the banking index increase by 44.8%, compared to a 32.3% rise in the Shanghai Composite Index [6][10] - The 2019-2021 cycle had the banking index rising by 37.1%, while the Shanghai Composite Index rose by 50.0% [6][10] Sector Rotation and Stock Selection - The report highlights that during the 2014-2015 bull market, city commercial banks and joint-stock banks performed well, with Nanjing Bank, Everbright Bank, and Ningbo Bank leading with gains of 181.6%, 171.3%, and 154.6% respectively [12][15] - In the 2016-2018 period, leading banks included China Merchants Bank and Ningbo Bank, with respective gains of 144.6% and 126.5% [15][25] - The 2019 cycle saw Ping An Bank and Ningbo Bank leading with gains of 79.1% and 77.9%, indicating significant stock differentiation [18][21] Investment Recommendations - The report suggests focusing on high-quality stocks with a significant retail component, as they are expected to have improved win rates and high payout ratios [5][36] - Specific banks recommended for investment include Ningbo Bank, Changshu Bank, Changsha Bank, China Merchants Bank, and Chongqing Rural Commercial Bank, as they are positioned well in the current market environment [5][36]