Core Viewpoint - The article discusses the long-term performance of the banking index, the factors driving its growth, and the current valuation, suggesting potential strategies for profit-taking. Group 1: Banking Index Performance - The representative index for the banking industry is the China Securities Banking Index, which has shown significant growth in recent years, particularly from 2019 to 2021, driven by a strong growth style. In contrast, from 2022 to 2024, value styles, including banking and dividend stocks, have gained strength, leading to new highs in index points [5][15]. - The annualized return of the China Securities Banking Index from July 15, 2013, to June 25, 2025, is 6.7%, which increases to 11.31% when considering dividends [15]. Group 2: Banking Industry Characteristics - The banking industry is characterized by strong cyclicality, with performance heavily influenced by macroeconomic conditions. During economic downturns, banks face increased risk provisions and reduced interest income, while the opposite occurs during economic upturns [7][11][12]. - The banking business model can be simplified to "two incomes and two expenses," which includes interest income, non-interest income, interest expenses, and risk provisions [8][10]. Group 3: Sources of Returns for Banking Index Funds - The three main sources of returns for banking index funds are: 1. **Valuation Improvement**: The price-to-book ratio (P/B) of the China Securities Banking Index increased from 0.87 on May 6, 2019, to 1.14 on June 26, 2025, contributing to returns [23][24]. 2. **Net Asset Growth**: The net assets of banks have been increasing annually since 2014, which is a key driver of the long-term rise in the banking index [27][28]. 3. **Increased Dividends**: The dividend yield for banking stocks has improved significantly due to policies encouraging higher dividend payouts, with total cash dividends reaching approximately 2.4 trillion in 2024 [30][32][35]. Group 4: Profit-Taking Strategies - Two common profit-taking strategies for banking index funds include: 1. **Profit-Taking Based on Yield**: Consider taking profits when the yield reaches 30% [37]. 2. **Profit-Taking Based on Overvaluation**: Monitor valuations and consider selling when the index is deemed overvalued [40][51]. - The article emphasizes the effectiveness of a strategy involving buying undervalued assets, holding during normal valuations, and selling when overvalued, which has been validated through past market cycles [47][51].

Core Viewpoint - The article discusses the performance and valuation of the banking index, highlighting the cyclical nature of the banking industry and the factors driving its recent growth, including interest income, non-interest income, and risk provisions [1][5][10]. Group 1: Banking Index Performance - The banking index, represented by the China Securities Banking Index, has shown significant growth since the bear market of 2018, with a notable increase in value from 2019 to 2021, primarily driven by growth stocks [1][3]. - From 2013 to 2025, the annualized return of the China Securities Banking Index is projected to be 6.7%, increasing to 11.31% when considering dividends [14]. - The maximum drawdown of the index was 37.08%, occurring between June 8, 2015, and August 25, 2015 [15]. Group 2: Characteristics of the Banking Industry - The banking sector is characterized by strong cyclicality, with revenue derived from interest income, non-interest income, interest expenses, and risk provisions [5][10]. - Banks typically earn interest income by borrowing at a lower rate and lending at a higher rate, with the difference known as the interest margin [6][9]. - The overall profitability of banks is significantly influenced by macroeconomic conditions, with performance improving during economic upturns and declining during downturns [11][12]. Group 3: Sources of Returns for Banking Index Funds - The three main sources of returns for banking index funds are: 1. Buying undervalued assets and benefiting from valuation (price-to-book ratio) increases [19][21]. 2. Growth in net assets, which has been a major driver of the banking index's long-term rise [25][26]. 3. Increased dividends and higher dividend yields, with recent policies encouraging higher dividend payouts from listed companies [28][31]. Group 4: Valuation and Investment Strategies - The valuation of the banking index is best assessed using the price-to-book ratio, which has increased from 0.87 in May 2019 to 1.14 by June 2025 [22][44]. - Investment strategies for banking index funds include profit-taking based on yield or valuation, with a recommendation to consider selling when the yield reaches 30% or when the index is deemed overvalued [36][40]. - The current valuation of the China Securities Banking Index is considered normal to slightly high, suggesting caution in new investments [44].

Core Viewpoint - The article discusses the recent performance of the banking index, its historical context, and the current valuation, suggesting potential strategies for profit-taking as the index reaches a relatively high valuation level [6][18][21]. Group 1: Market Performance - The market experienced a slight decline after three consecutive days of increase, maintaining a rating of 4.9 stars [1]. - Both large-cap and small-cap stocks saw a decrease, while the banking index showed strength and reached a historical high [2][3][6]. - The value style, including dividend stocks, exhibited relatively small fluctuations during this period [4]. Group 2: Historical Context of Banking Index - The banking index has had strong performance in recent years, but historically, it has also faced periods of underperformance, leading to negative perceptions such as "three fools" and "big rotten smell" [6][8]. - From 2014 to 2015, small-cap stocks were in a bull market while large-cap stocks, including banks, were underperforming [7]. - The period from 2016 to 2017 saw a shift where large-cap stocks began to perform better as small-cap stocks faced declines due to valuation bubbles [8]. Group 3: Current Valuation and Profit-Taking Strategies - The banking index has seen significant growth in recent years, driven by both valuation increases and growth in earnings and net assets, resulting in a "double effect" [19]. - Currently, the banking index's valuation is considered normal to slightly high, with expectations that upcoming financial reports may lead to a decrease in perceived valuation [21]. - For profit-taking, two strategies are suggested: selling based on high valuation or achieving a satisfactory return, with recommendations for gradual selling [23]. Group 4: Dividend Indices and Value Style - The article differentiates between the banking index and dividend indices, noting that the banking index is weighted by market capitalization while dividend indices are weighted by dividend yield [10][11]. - Despite differences, both categories fall under the broader value style, which has shown strength from 2022 to 2024 [14][15].