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Banking sector’s defensive attributes stand out as funds pour into low-valuation, high-dividend stocks
The A-share banking sector has recently shown pronounced defensive attributes and may see recovery opportunities over the long term. As of 11:00 a.m. on July 20, A-share bank stocks all rose, with Xiamen Bank up 5.15 percent, Shanghai Rural Commercial Bank up 3.75 percent, and Bank of Zhengzhou up 2.86 percent. The CSI Bank Index gained 1.71 percent, while the Hang Seng China Mainland Financial Index rose 2.31 percent. Industry insiders noted that tech stocks slumped broadly last Friday, prompting funds to exit high-volatility, high-valuation tech growth sectors and flow into defensive sectors characterized by stable dividends and low valuations, with the CSI Bank Index being a direct beneficiary. Huatai Securities analysis suggests the market may see a style rebalancing opportunity, and banks, as a sector with improving fundamentals, could see recovery opportunities in subsequent fund rotation. The ChinaAMC Bank ETF is among the lowest total expense ratio ETFs tracking the CSI Bank Index, with feeder funds including A-class 008298, C-class 008299, and D-class 024642. The Hang Seng China Mainland Financial Index selects mainland-controlled financial-themed stocks from the Stock Connect universe, with banks and insurance accounting for nearly 90 percent and the Big Four banks making up around 45 percent. The ChinaAMC Hang Seng China Mainland Financial ETF is the largest ETF tracking this index.