Banking stocks in the A-share market rose, with Bank of China up more than 5%, China Construction Bank up more than 4%, Postal Savings Bank of China up more than 3%, and Minsheng Bank, Everbright Bank, Nanjing Bank, Hua Xia Bank, Bank of Communications, Zhejiang Commercial Bank, and Bank of Beijing up more than 2%.
Notably, both Bank of China and ICBC hit new all-time highs during trading.
Bank ETF funds, including those managed by Southern Asset Management, E Fund Management, Tianhong Asset Management, Index ETFs, leading bank ETFs, and Bank AH Preferred ETFs, all experienced gains.
The Bank ETF passively tracks the China Securities Bank Index, comprising 42 listed banks in the A-share market, with nearly 30% of its allocation in major state-owned banks such as ICBC, Agricultural Bank of China, and Bank of Communications, capturing opportunities in the 'high dividend' theme; approximately 70% of the allocation focuses on high-growth joint-stock banks, urban commercial banks, and rural commercial banks like China Merchants Bank, Industrial Bank, and Jiangsu Bank, making it an efficient investment tool for tracking the overall performance of the banking sector.
The bank AH preferred ETF tracks the bank AH index, which is composed of the China Securities Bank Index and securities listed on the Hong Kong market that are simultaneously available in AH shares, employing a monthly security category conversion strategy based on AH price selection.
Around the 4,000-point level, the A-share market is showing characteristics of a phase-style rotation, driven by multiple resonating factors: First, as year-end institutional evaluations approach, high-gain tech stocks face profit-taking pressures, with some stocks being overvalued and lacking further fundamental support, reducing institutions’ willingness to push prices higher. Second, the People's Bank of China recently reaffirmed its commitment to implementing moderately accommodative policies, maintaining ample liquidity, which provides support for low-valuation financial and cyclical sectors.
From the perspective of public fund holdings, the proportion of banking stocks in key portfolios fell to 1.49% in Q3 2025, expanding underweight positioning. Heavily held stocks saw relatively larger reductions. In total, public funds held RMB 30.8 billion worth of A-share banking stocks in Q3 2025, out of a total portfolio value of RMB 2,061.6 billion, representing 1.49% of their key holdings—a decrease of 2.41 percentage points from Q2 and 4.38 percentage points below sector benchmarks, with underweight positioning widening (compared to an underweight of 3.93 percentage points in Q2). On an individual stock basis, the market value of banking stocks held in Q3 2025 generally declined, with heavier institutional holdings seeing relatively larger reductions.
In Q3, insurance capital increased its allocation to the banking sector, highlighting the investment value of banks. By Q3 2025, insurance capital allocated 27.95% of its holdings to banking stocks, representing 3.99% of the total free float of listed banks, increasing by 0.29 percentage points but decreasing by -2.52 percentage points compared to the previous quarter. However, in terms of share count, insurance capital added 8.36 billion shares to the banking sector. Based on the top ten shareholders of listed banks, by the end of September, insurance capital had invested in 23 banks, two more than the previous quarter, with ten receiving additional investments. Several new insurance entrants also appeared, including major banks and regional banks. Factors such as increased premium inflows, rising equity investment ratios, extended-cycle assessments, and the expansion of IFRS 9 to non-listed insurers are driving incremental allocations by insurance capital. On one hand, considering the stable dividends, minimal earnings volatility, and current low valuations of the banking sector, dividend yields remain attractive, especially for H-share banks. On the other hand, beyond securing steady dividends, insurance capital can improve income statements through the equity method, favoring high-ROE mid-sized and smaller banks. Banks like Hangzhou Bank, Changshu Bank, and Nanjing Bank, newly added by insurance capital this year, reported annualized ROEs above 11% in the first three quarters, ranking among the industry’s top performers. The 'two participations, one control' rule may act as a constraint, but its short-term impact is limited; as of September, only three insurers among the top ten shareholders of listed banks reached the cap, unchanged from the previous quarter.
Galaxy Securities believes that insurance capital will continue to increase its allocation to the banking sector, with room for further growth, and the investment value of banks will remain prominent. The launch of the 15th Five-Year Plan will drive transformation in the banking industry, with continued improvement in net profits in Q3. Attention should be paid to progress in reforms and opportunities for fundamental recovery. The strength of banks’ interim dividend payouts remains robust, with dividend value continuing to stand out. Combined with multi-dimensional inflows of capital accelerating the reshaping of bank valuations, the configuration value of the banking sector continues to be favored.
