Zhongtai: In the second quarter of 2026, the three major funds jointly flowed out of the banking sector, but the certainty of performance supports stable annual returns.

Zhongtai released a research report stating that in the second quarter of 2026, both passive funds, active funds, and northbound funds all flowed out of the banking sector. The inflow scale of passive/active/northbound funds in the second quarter of 2026 was -571.6/-42.8/-61.7 billion Yuan respectively, with the net change scale accounting for 3.59%/0.27%/0.39% of the quarterly turnover, totaling -676.1 billion Yuan. Currently, the proportion and ranking of positions held by various institutions in the free float market value of banking stocks are as follows: Northbound funds (5.41%) > Passive funds (1.47%) > Active funds (0.97%), compared to 5.70%, 3.31%, 1.12% in the first quarter of 2026. The certainty of annual banking performance will bring stable returns to banking stocks in 2026, which are short-term and market style-related; strong corporate business and sustained low-risk preference of residents will drive interest rate spreads to bottom out and revenue growth will continue to be a highlight, with strong performance certainty. Two main investment themes for banking stocks: one is regional advantageous and certain city commercial banks, including those in Jiangsu, Shanghai, Chengdu-Chongqing, Shandong, and Fujian, with a focus on the Bank of Jiangsu (600919.SH), Qilu Bank Co., Ltd. (601665.SH), Chongqing Rural Commercial Bank (601077.SH), Bank of Hangzhou (600926.SH), Bank of Shanghai (601229.SH), Nanjing, Chengdu, and Shanghai Rural Commercial Banks. The second theme is high dividend yield and stable logic, with a focus on large banks: the six major banks (such as Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China); as well as joint-stock banks like China Merchants Bank, Industrial Bank, and CITIC Bank. Zhongtai's main points are as follows: In the second quarter of 2026, overall funding: both passive funds, active funds, and northbound funds flowed out of the banking sector. The inflows of passive/active/northbound funds in the second quarter of 2026 were -571.6/-42.8/-61.7 billion Yuan respectively, with the net change scale accounting for 3.59%/0.27%/0.39% of the quarterly turnover, totaling -676.1 billion Yuan. Currently, the proportion and ranking of positions held by various institutions in the free float market value of banking stocks are as follows: Northbound funds (5.41%) > Passive funds (1.47%) > Active funds (0.97%), compared to 5.70%, 3.31%, 1.12% in the first quarter of 2026. Active funds: The proportion of holdings in banks in the second quarter of 2026 was 1.10%, a decrease of 0.88 percentage points compared to the previous quarter. The change in position was a major contributing factor, with a contribution of -0.17% from the decline in the banking sector and -0.71% from the change in position. Due to market preferences for technology growth sectors, funds flowed out of the banking sector in the amount of 42.8 billion Yuan. (1) On the industry level, the market value of active fund holdings in banks at the end of the second quarter was 257.5 billion Yuan, a decrease of 19.9% compared to the previous quarter, with a holding ratio of 1.10%. This represents a decrease of 0.88 percentage points compared to 1.98% in the first quarter of 2016. The change in position was a major contributing factor, with -0.17% from the decline in the banking sector and -0.71% from the change in position. The sector as a whole still remains under-allocated, with the standard allocation ratio decreasing by 0.25 percentage points to -3.94%. (2) On the individual stock level, A, the holding proportion: as of the second quarter of 2016, the top five bank stocks held by active funds (including closed-end funds) were Ningbo Bank, China Merchants Bank, Bank of Jiangsu, Industrial and Commercial Bank of China, and Bank of Hangzhou, with a proportion of 0.24%, 0.19%, 0.10%, 0.07%, 0.06% respectively. B, the increase in holdings compared to the previous period: the top three were Qilu Bank (+0.006%), Qingdao Bank (+0.001%), and Shanghai Pudong Development Bank (+0.001%). C, the proportion of holdings to the market value of listed bank stocks: the top five bank stocks were Ningbo Bank, Yunnan Rural Bank, Qilu Bank, Qingdao Bank, and Changsha Bank, with proportions of 5.55%, 4.05%, 4.04%, 2.67%, 2.61% respectively. D, fund flows: the top five banks with the largest net inflows were Nanjing Bank, Qilu Bank, China Merchants Bank, Qingdao Bank, and Bank of Jiangsu, with net inflows of 3.86, 3.84, 2.22, 1.07, 1.06 billion Yuan respectively. Passive funds: due to the impact of shrinking management scale, the net outflow scale of funds from the banking sector was 571.61 billion Yuan. (1) The scale and proportion of bank stock holdings in ETF funds: in the second quarter of 2026, the market value of ETF funds tracking the Shanghai-Shenzhen 300/CSI 50/CSI 1000/CSI 500/CSI A500 decreased by 424.46 billion Yuan compared to the previous quarter. At the end of the second quarter, passive funds held a total market value of bank stocks of 387.71 billion Yuan, a decrease of 59.6% compared to the end of the first quarter, with the total market value of bank stocks held accounting for 1.47% of the free float market value of listed banks, a decrease of 1.85 percentage points from the end of the first quarter. (2) Increase and decrease in passive fund holdings of bank stocks: in the second quarter of 2026, passive funds showed an outflow of funds from bank stocks. The net outflow scale of passive funds from the banking sector in the second quarter was 571.61 billion Yuan, with significant outflows from China Merchants Bank, Industrial Bank, and Industrial and Commercial Bank of China, with outflow scales of -111.90, -74.55, -55.85 billion Yuan respectively (broad-based weighted varieties). Northbound funds: overall net outflows from the banking sector in the second quarter, with a divestment scale of 61.7 billion Yuan. (1) Overall holdings market value: at the end of the second quarter of 2026, northbound funds held a total market value of 143.29 billion Yuan in bank stocks, a decrease of 12.2% compared to the end of the first quarter of 2016, with the total market value of bank stocks held accounting for 5.41% of the free float market value of listed banks, a decrease of 0.23 percentage points from the end of the previous quarter. (2) From the perspective of the increase and decrease in holdings of bank stocks by northbound funds, there was an overall net outflow from the banking sector in the second quarter, with a divestment scale of 61.7 billion Yuan; in terms of individual stocks, the banks with significant net inflows in the second quarter of 2026 were Ningbo Bank, Ping An Bank, and Bank of China, with inflow scales of 25.5, 18.3, 6.4 billion Yuan respectively.