Core Insights - The banking sector's fundamentals are showing slight improvement with low volatility, and excess returns are expected to revert by November [1] - Key observation points include the peak confirmation of M1 growth and the progress of new quotas for insurance capital [1] - The reduction of 110 billion yuan in "other financial company debts" by the central bank in August suggests that the capital market's activity has reached a policy-consistent level [1] Group 1 - The liquidity indicators such as social financing, M2, and M1 growth are expected to peak in stages, with M1 growth likely confirming its peak by mid-November [1] - There is a rising instability in micro bank liabilities due to trends of deposit short-termization, liquidity, and wealth management, which will increase the endogenous instability of bond market liquidity [1] - Although social financing growth rebounded in September, the peak has already passed in July, and fiscal strength is declining year-on-year [1] Group 2 - Current bank valuations correspond to long-term annualized returns and Sharpe ratios that surpass the overall market, indicating potential allocation value [1] - The Financial ETF (510230) tracks the 180 Financial Index (000018), which selects representative securities from banks, insurance, and securities sectors to reflect the overall performance of listed companies in the financial industry [1] - The 180 Financial Index focuses on large-cap blue-chip style allocation and serves as an important indicator of financial market dynamics [1]

Investment Rating - The report maintains a "Recommended" rating for the industry, indicating a positive outlook for the industry fundamentals and expectations for the industry index to outperform the benchmark index [5]. Core Insights - The M1 growth rate is expected to peak in September, with various factors contributing to its fluctuations, including fiscal contributions and base effects from previous years [3][4]. - The analysis indicates that the current financial data suggests a cautious outlook for liquidity, with M1 and other liquidity indicators likely reaching their high points [4]. - The report emphasizes the importance of monitoring fiscal policies and real estate stabilization trends for future M1 growth [3]. Summary by Sections Financial Data Analysis - M1 growth is primarily driven by fiscal contributions, with a notable increase of 5.5 trillion yuan year-on-year from September last year to August this year [2]. - The report highlights that M1's year-on-year growth has rebounded by 9.3 percentage points, largely due to fiscal and base effects [2][3]. Market Outlook - The report suggests that the peak of social financing growth has passed, and fiscal strength is beginning to decline year-on-year [3]. - It notes that if fiscal budgets do not increase, the fourth quarter may see a negative contribution to M1 growth, indicating a potential peak in September [3]. Investment Recommendations - The report advises investors to adopt a long-term perspective and balanced allocation, focusing on banks with superior free cash flow and asset quality [9]. - It suggests that the banking sector is expected to provide annualized returns and Sharpe ratios that exceed the overall market, making it a favorable investment area [9].