Recently, bank stocks have significantly outperformed the market, particularly the four major state-owned banks: Industrial And Commercial Bank Of China, Agricultural Bank Of China, Bank Of China, and China Construction Bank Corporation, whose stock prices have reached historic highs. Institutions believe that the strength of bank stocks is mainly related to dividend factors and valuation reshaping.

The four major banks have reached historic highs again.

On December 25th, the A-share banking Sector continued to be strong, and the closing prices of the four major banks once again set historic highs. The stock price of Industrial And Commercial Bank Of China rose by a maximum of 3.83% during the day, surpassing 7 yuan/share, with its Market Cap briefly exceeding CHINA MOBILE. As of this year, in the Hong Kong stock market, $ICBC (01398.HK)$ it has cumulatively risen nearly 48%,$ABC (01288.HK)$with an increase of over 59%, $CCB (00939.HK)$ Accumulated increase of over 54%,$BANK OF CHINA (03988.HK)$ Increased by over 45%.

It is worth noting that yesterday the Hong Kong stock market was closed, and several ETFs that focus on Hong Kong bank stocks and dividend assets showed significant gains. Among them, the Investment Fund that holds both A and H bank stocks, CM BANK CSI Banks AH Price Preferred ETF, hit the limit up during trading, closing with an increase of 6.94%, reaching a historical high. In addition, the Cathay CSI Hong Kong Stock Connect High Dividend Investment ETF and the Cathay CSI Hong Kong State-Owned Enterprises ETF also saw gains exceeding 2%.

Since the beginning of this year, the banking sector has steadily risen at a pace faster than the Large Cap index, with the industry index having an accumulated growth rate of 34.62%, ranking first among all Shenwan industries, outperforming the CSI 300 Index by about 18 percentage points. This is also the only time in the past 10 years that the Banking Industry Index has outperformed the CSI 300 Index while rising.

Foreign capital is significantly increasing its holdings in bank stocks.

Regarding the recent continuous rise in bank stocks, several institutions have indicated that the primary reasons are related to dividend factors and valuation reshaping. GF SEC stated that dividends remain an important driving factor for individual stock price increases; from the end of this year to January next year is a high dividend allocation window, and it is expected that the banking sector will perform at par with the market.

Changjiang Securities stated that since 2023, state-owned bank stocks have continued to rise, and there is a divergence between bank stocks and the REAL ESTATE INDEX as well as macroeconomic expectations, mainly reflecting the revaluation of previously unreasonable low valuations. The outlook for 2025 still clearly favors bank stocks due to their low valuations, high dividends, and low Hold Positions leading to value revaluation.

Additionally, the large-scale shareholding increase in Bank Of China stock by several trillion-dollar foreign funds is one of the reasons why bank stocks have recently outperformed the market. Morningstar data shows that in November, funds under Morgan Asset Management made significant purchases of CM BANK A shares, with an increase of 222.71%. By the end of November, they held 92.1519 million USD worth of CM BANK shares, equivalent to approximately 0.673 billion RMB at the latest exchange rates.

Another fund under Fidelity International is also heavily investing in multiple Chinese bank stocks. According to Morningstar data, by the end of November, this fund had significant holdings in the Hong Kong stocks of Industrial And Commercial Bank Of China, China Construction Bank Corporation, and CM BANK, with each stock holding exceeding 90 million USD. In November, the fund also increased its holdings in CM BANK's Hong Kong stock by 1.11%.

The industry is still in a state of collective net asset value impairment.

Bank stocks have always been characterized by low valuations, high dividends, and strong defensive properties. According to statistics from Securities Times and Data Treasure, as of the latest, bank stocks remain in a state of collective impairment of net asset value, with CM BANK having the highest PB ratio, previously exceeding 1, and currently at 0.99. The average PB ratio for individual stocks in the industry is 0.62.$MINSHENG BANK (01988.HK)$Bank Of Guiyang has a PB ratio of less than 0.4.

Since the beginning of this year, the market value management of central enterprises has been repeatedly mentioned, and a return to industry valuations is expected. The State-owned Assets Supervision and Administration Commission recently issued several opinions on improving and strengthening the market value management of controlling listed companies, emphasizing the need to actively address the long-standing impairment of controlling listed companies. Data shows that the bank sector has been in an impaired state for as long as 6 years, and under policy guidance, valuations are expected to recover.

In the "toolbox" of market value management, the most commonly used method for bank stocks is cash dividends, which are an important component of dividend assets. Data shows that the average dividend yield for bank stocks over the past 12 months has reached 4.9%.

It is worth noting that this year, a total of 22 bank stocks have announced or are distributing interim dividends, and additionally, $BCQ (01963.HK)$will distribute dividends for the third quarter, while last year, bank stocks only distributed year-end dividends, indicating a significant increase in the industry's enthusiasm for dividends. Based on the declared dividend amounts, the six major state-owned banks plan to distribute over 10 billion yuan, such as Industrial And Commercial Bank Of China, which will be making its first interim dividend since listing, with a dividend amount reaching 51.109 billion yuan.

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