According to an research report released by Xingye Securities, the banking sector has outperformed this year, as of August 19, the SW banking index rose by 19.08%, ranking first among all 31 primary industries and exceeding the second place by 10%. Among them, the stock prices of the five major banks, including ICBC and ABC, have also reached new highs. The rise of banks is due to the market's pursuit of low-volatility red chips, especially the five major banks, which are the representatives of dividends. More importantly, it is the change in incremental funds - since the beginning of the year, it has been repeatedly emphasized that the leading incremental funds are mainly two blocks: ETFs and insurance. These two blocks of funds have a high proportion of allocations to banks, and therefore become an important driving force for the rise of banks.

Guosen Securities' main points are as follows:

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According to data released by the National Financial Authority, as of June 2024, this year's insurance companies' premium income accumulated a year-on-year growth of 10.65%, and the balance of insurance fund utilization has also grown by 9.62% since the beginning of the year, bringing about a large amount of configuration needs for insurance funds. Therefore, although this year's market performance is still relatively weak overall, the increase in the absolute size of insurance funds still injects a lot of liquidity into the market. As of June 2024, the scale of stocks and fund holdings held by property and casualty insurance and life insurance (accounting for 96.6% of the total insurance assets) respectively increased by 136.9 billion and 169.3 billion yuan from the beginning of the year, becoming a rare increase in the market this year.

Among them, the banking sector, as the first target of insurance funds, has also significantly benefited from the continuous inflow and increased allocation of insurance funds. This year, cases such as Wuxi Rural Commercial Bank being taken over by insurers have emerged one after another. At the same time, as of the first quarter of 2024, the bank holdings in insurance funds accounted for 48.3% of the total, an increase of 0.8 percentage points from the beginning of the year, indicating that banks are still the absolute stronghold of insurance funds.

This year, with ETF funds flowing in heavily and mainly increasing their positions in the CSI 300, banks, as the largest weighted industry in the CSI 300 index, have also significantly benefited. According to estimates, as of August 16, the net inflow of equity ETFs this year is about 629.3 billion yuan, of which the net inflow of broad-based ETFs is 635.9 billion yuan, and the net outflow of other types is small. Broad-based ETFs are the core source of incremental funds, and the ETF products that track the CSI 300 index are the most inflows, with a net inflow of about 447.7 billion yuan this year, accounting for 70% or more of the total net inflow of broad-based ETFs.

Therefore, the impact and shaping of the capital side on the market style is the direction that the market needs to focus on this year. This year, the emphasis has been on the large-cap and leading styles, and a key factor is also the channel of incremental funds - insurance and ETFs are both based on large-cap leading as the core of configuration, driving the large-cap leading style to become the true beta of the market this year.

In addition, the necessity of studying the capital side must also be given more attention. The capital side has been emphasized as "money decides style". Since this year, it has witnessed the influence of the capital side on the market line from a fundamental point of view - the rise of banks cannot be effectively explained from a fundamental of view, while the capital side is a more important driving factor.

Pay attention to fluctuations in economic data, unexpected tightening of policies, unexpected rate hikes by the Federal Reserve, etc.

The influence of the capital side on the market should also be emphasized and valued. This year, the focus has been on large-cap and leading styles. A key factor is also the channel of incremental funds - insurance and ETFs are both based on large-cap leading as the core of configuration, driving the large-cap leading style to become the true beta of the market this year.

Risk warning

The banking sector has outperformed this year, as of August 19, the SW banking index has risen by 19.08%, ranking first among all 31 primary industries and exceeding the second place by 10%. Among them, the stock prices of the five major banks, including ICBC and ABC, have also reached new highs. The rise of the banks is due to the market's pursuit of low-volatility red chips, especially the five major banks, which are the representatives of dividends. More importantly, it is the change in incremental funds - since the beginning of the year, it has been repeatedly emphasized that the leading incremental funds are mainly two blocks: ETFs and insurance. These two blocks of funds have a high proportion of allocations to banks, and therefore become an important driving force for the rise of banks. In addition, the influence of incremental funds on the market style is also worth noting, and fluctuations in economic data, unexpected tightening of policies, unexpected rate hikes by the Federal Reserve, etc. should also be paid attention to.