Zhongtai: The current financial stocks belong to a misalignment period of undervaluation + stable fundamentals.

Zhongtai released a research report stating that the overall investment logic of the financial sector is as follows: first, regulatory policies focus on nurturing a slow bull market in the medium to long term, and the financial sector is given the core function of stabilizing the market; second, under K-shaped differentiation, technology and exports perform strongly, leading to overall returns in the financial sector; third, the pressure from previous selling has been largely released, and currently financial stocks are in a mismatched period of undervaluation and stable fundamentals. Banks: Net interest margins are stabilizing, performance is resilient, and pressure from previous selling has been largely released. Insurance: The performance of listed insurance companies in the first half of 2026 has significantly improved, with insurers with high equity positions benefiting from the investment income brought by the science and technology innovation trends. Securities firms: Increasing market turnover and margin trading support brokerage businesses growth, with industry performance showing high growth in the first half of 2026. Zhongtai's main points are as follows: Overall investment logic of the financial sector: 1. Policy environment and sector positioning: Regulatory policies focus on nurturing a slow bull market in the medium to long term, with the policy continuity in place. The market relies on the financial sector to hedge against the volatility in growth sectors, with undervalued financial assets with clear earnings certainty entering a phase of fund re-pricing. 2. Under K-shaped differentiation, overall returns for the financial sector: The current economy shows characteristics of strong supply and weak demand, with strong policy continuity from the July political bureau meeting. This trend is expected to continue long-term; the production side, technology, and exports are strong, while traditional consumption, real estate, and other sectors are weak. The financial sector as a whole benefits from this macroeconomic environment. 3. Pressure release and valuation mismatch: Long-term selling of financial stocks has led to low sector valuation, creating a mismatch between valuation and earnings, with current allocation showing strong value. With the stable market demand increasing, the market will gradually focus on the stable fundamentals and undervaluation of financial stocks. Fundamentals and allocation logic of the banking sector: Listed banks show resilient profitability, with limited constraints on net interest margins, and revenue continues to grow positively. Asset quality shows structural differentiation, with improvement in corporate asset quality offsetting retail non-performing loan pressures. Pressures from selling by state-owned funds such as China Securities Finance Corp. and Central Huijin Investment Ltd. have been largely released, while insurance capital continues to increase. Allocation is divided into two main themes: high dividend state-owned large banks and high return regional city commercial banks. Recovery logic of the insurance sector: The performance of listed insurance companies in the first half of 2026 has significantly improved, with insurers with high equity positions benefiting from the investment income brought by the science and technology innovation trends. There is a clear deviation between the sector's performance improvement and stock price trends, with the core suppression factors being a concentration of funds in technology sectors and previous selling activities. Insurers continue to make investments in science and technology assets, with improvements in the investment side having sustainability. Recommendations include allocations to insurers with high equity flexibility, leading composite insurers, and leading property insurers. Market trends and growth logic in the securities sector: Increasing market turnover and margin trading support brokerage businesses growth, with high industry performance growth in the first half of 2026; acceleration of IPOs for science and technology companies, leading securities firms relying on investment banking, direct investment, and follow-up investments forming long-term growth trends, while overseas business expansion smooths out cyclical fluctuations. Securities firms are positioned as aggressive allocations within the financial sector, with potential for short-term valuation recovery and long-term growth in science and technology, recommending a focus on leading securities firms. Investment advice for the banking industry: 1. The certainty of full-year bank performance will bring stable returns for bank stocks in 2026, with short-term performance related to market trends; the strong policy continuity will continue (supported by policies), strong corporate business performance, and the sustained low-risk preference of residents will drive net interest margin stabilization and revenue growth highlights, with strong performance certainty. 2. Two main investment themes for bank stocks: one is regional advantageous and strong city commercial and rural banks, including regions such as Jiangsu, Shanghai, Chengdu-Chongqing, Shandong, and Fujian. The second is the logic of high dividend stability, with a focus on recommending large banks. Investment advice for the non-banking sector: Continued optimism for the investment value of securities and insurance sectors. Previous selling by large funds has led to low sector valuations, with gradual clearance of selling funds and market funds re-balancing, market and policy emphasis will stabilize the value of financial stocks. The mismatch between performance and valuation is expected to be rebalanced. The securities sector is currently in a configuration window of "high fundamentals + low historical valuations," with high science content, sufficient reserves in science and technology follow-up businesses, providing support for future profit flexibility, plenty of room for valuation recovery, and recommending a continued focus on the configuration opportunities under high fundamentals and low valuations in the sector. Risk warning: Macroeconomic recovery falls below expectations, credit risks in real estate and urban investment exceed expectations, continuous shrinkage in market turnover, significant fluctuations in equity markets suppress insurance and securities performance, and changes in industry regulation policies.