On August 24th, the A-share market experienced a broad correction, with nearly 4,000 stocks falling across the market. However, the banking sector strengthened against the market trend throughout the day, with 40 of the 42 banking stocks closing higher.
Chongqing Rural Commercial Bank rose over 3%, while Wuxi Bank, Xiamen Bank, Huaxia Bank, Rui Feng Bank, and China CITIC Bank all gained more than 2%, with China CITIC Bank hitting a record high. The Banking ETF Huabao (512800), which tracks the overall performance of the banking sector, showed notable strength. Note: As of August 24, 2026, the weightings of Chongqing Rural Commercial Bank, Wuxi Bank, Xiamen Bank, Huaxia Bank, Rui Feng Bank, and China CITIC Bank in the CSI Banking Index are 1.12%, 0.27%, 0.32%, 1.39%, 0.31%, and 1.30%, respectively.
Recently, as hot sectors such as hard technology have pulled back, banking stocks have frequently demonstrated independent defensive moves. The banking sector's resilience in weak markets may be attributed to multiple factors.
Where to begin
First, the fundamentals are showing positive signs of stabilization and recovery. Among the four city commercial banks that have released their Q2 reports—Bank of Ningbo, Bank of Jiangsu, Bank of Nanjing, and Bank of Chongqing—pre-provision operating profits are all around 10%-16%. The industry's high year-on-year growth in net interest income lays a solid foundation for robust full-year performance. Additionally, data from the National Financial Regulatory Administration shows that as of the end of Q2 2026, the net interest margin of commercial banks stood at 1.41%, up 1 basis point quarter-on-quarter. This marks the first single-quarter sequential positive growth in commercial bank net interest margins since Q1 2022, breaking a four-year trend.
Second, high dividend yields provide "bond-like" allocation value. As of August 21st, the dividend yield of the CSI Banking Index was 4.27%, representing an excess of 2.57 percentage points over the risk-free rate implied by the 10-year government bond yield (1.7%). The total dividends distributed by A-share listed banks for fiscal year 2025 reached RMB 645.637 billion, setting another record high. Stable and sustained dividend returns are attractive to medium- and long-term capital. The official version of the Measures for the Administration of Assets and Liabilities of Insurance Companies is expected to further drive insurers to increase allocations to high-dividend assets. Mainstream banking stocks, which boast massive market capitalization capacity, strong dividend stability, and current dividend yields of 4%-6%, are poised to benefit from the trend of increasing insurance capital holdings.
Third, low valuations offer potential room for recovery. As of August 21st, the price-to-book ratio (PB LF) of the CSI Banking Index was only 0.68 times, sitting at the 44.72% percentile over the past decade. All 42 banking stocks are trading below book value, providing a high margin of safety and recovery potential.
What lies ahead for the sector
Feng Chencheng, fund manager of the Banking ETF Huabao (512800), believes the equity market continues to exhibit a "style rebalancing" seesaw effect. While the seesaw affects the pace of recovery, it does not alter the direction. Even if tech stocks rebound, the medium-term valuation recovery process for banks remains ongoing. The banking sector's monthly charts still show upward momentum. In Q2, the weight of banking stocks in fund heavy positions dropped to historic lows, and the style rebalancing process is accompanied by a rebalancing of previously underweighted positions.
According to Zhongtai Securities, banks are relatively resilient holdings in a lackluster market, and in bull markets, the alpha of bank stocks does not lag the broader market. During the three phases of market declines in 2015-2016, 2018-2019, and 2021-2024, banks were consistently relatively resilient, with declines significantly smaller than those of the CSI 300. In terms of capital and positioning, the reduction of holdings by China Securities Finance Corporation is nearing its end, and the scale of broad-based index funds has fallen back to pre-2024 rescue levels. The disturbance from state-related institutional capital has largely been eliminated. In the short term, there is a seesaw effect with tech stocks, but the long-term pricing remains anchored around ROE and dividends.
Riding the trend with both offense and defense! The Banking ETF Huabao (512800) passively tracks the CSI Banking Index, with constituent stocks covering all 42 A-share listed banks. It serves as an efficient investment tool for tracking the overall banking sector. Off-market investors may consider the linked fund 006697. Data sources: Shanghai and Shenzhen stock exchanges, among others. Institutional views sourced from Zhongtai Securities, August 24, 2026, "Analysis of the 'Dividend' Value of Bank Stocks: Absolute Returns from Fundamental and Investment Perspectives."
ETF fee note: When investors subscribe for or redeem fund shares, the subscription/redemption agency may charge a commission of up to 0.5%, which includes fees charged by the stock exchanges and registration institutions. Linked fund fee note: For the Huabao CSI Banking ETF Linked Fund (Class A), the subscription rate (front-end) is RMB 1,000 per transaction for subscription amounts of RMB 2 million or above, 0.6% for amounts between RMB 1 million and RMB 2 million, and 1% for amounts below RMB 1 million. The redemption fee is 1.5% for holding periods of less than 7 days, 0.5% for holding periods between 7 days (inclusive) and 180 days, 0.25% for holding periods between 180 days (inclusive) and 1 year, and 0% for holding periods of 1 year (inclusive) or more. No sales service fee is charged. The Huabao CSI Banking ETF Linked Fund (Class C) charges no subscription fee. The redemption fee is 1.5% for holding periods of less than 7 days, 0.5% for holding periods between 7 days (inclusive) and 30 days, and 0% for holding periods of 30 days (inclusive) or more. The sales service fee is 0.2%.
Risk warning: The Banking ETF Huabao (512800) passively tracks the CSI Banking Index, which has a base date of December 31, 2004, and was published on July 15, 2013. The CSI Banking Index's returns over the past five full years are as follows: 2025, 6.79%; 2024, 34.71%; 2023, -7.27%; 2022, -8.78%; 2021, -4.41%. The volatility over the past five full years is: 2025, 14.03%; 2024, 19.34%; 2023, 13.41%; 2022, 18.56%; 2021, 18.63%. The index's constituent stocks are adjusted periodically according to its compilation rules. Past performance does not guarantee future results. The index constituents mentioned in this article are for illustrative purposes only, and descriptions of individual stocks do not constitute investment advice in any form, nor do they represent the holdings or trading activities of any fund under the management of the fund manager. The fund manager assesses the risk level of this fund as R3—medium risk, suitable for balanced (C3) and above investors. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors are solely responsible for their own investment decisions. Furthermore, any views, analyses, or forecasts in this article do not constitute investment advice to readers in any form, nor are they responsible for any direct or indirect losses arising from the use of the content herein. Fund investment involves risks. Past performance of a fund does not represent its future performance. The performance of other funds managed by the fund manager does not constitute a guarantee of fund performance. Please invest cautiously.
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