Zhongtai: The rebalancing of insurance funds is expected to continue, and the sector is likely to extend its relative and absolute return contributions from July into August.

Zhongtai released a research report stating that since late June, the overall sector has shown a trend of "three advances and two retreats," indicating a rise in the bottom central axis. Amid increasing market volatility, the financial sector has been assigned a core role in stabilizing the market, with capital shift from suppression to bottom support. It is optimistic about the sector's continued performance in "relative outperformance first, then absolute outperformance." Currently, the valuation attractiveness of insurance stocks is strong, and the ongoing divergence between fundamentals and stock prices is expected to experience a strong correction. The firm believes that the overarching logical framework for the sector remains unchanged: "short-term look for relief from capital pressure, medium-term focus on 'deposit migration & continued slow bull' to boost value and profit growth, and long-term view on counter-cyclical factors to resolve concerns about interest margin losses." The long-term logic of the insurance sector is based on deposit migration on the liability side and continued slow bull on the asset side. The main points from Zhongtai are as follows: Since the beginning of the year, the current TII for insurance capital is 3.77%, positioned at the 26.19th percentile of historical data (since 2016), indicating a relatively high level. Calculations show that the simulated yield on new funds for the current period (July 2026) is 2.58% (compared to 2.61% last period and 2.63% in the same period last year); the simulated net investment yield for this period is 3.18% (compared to 3.23% last period and 3.44% in the same period last year); the simulated annualized total investment yield for this period is 3.77% (compared to 4.97% last period and 4.83% in the same period last year). The total investment yield exceeds the net investment yield because the trading price spread of financial assets for this period (non-annualized) reached 3.68% (compared to 9.77% last period and 9.27% in the same period last year). Tracking of fixed-income asset yields The shortage of quality assets persists, with maturity yield levels flattening. According to the banks calculations, the average NMII for bonds in this period is 1.86%, with a stock NII of 2.74%; the adjusted average yield of new deposits is 1.62%, while the stock yield is 2.41%; based on data from the Trust Investment Network, the average expected annualized yield for non-standard asset management trusts is 4.74%. Since June, insurance capital has been reallocating to bonds, significantly purchasing 30-year interest rate bonds (mainly local government bonds), a trend that has continued into July. From the increase in allocation of various tenured bonds since 2026, 20-30 year local bonds, 20-30 year interest rate bonds, 9M-1Y certificates of deposit, 15-20 year interest rate bonds, and 15-20 year local bonds are the top five allocations. Tracking of equity asset yields The A-share market has experienced unilateral declines, with some stabilization in indices at the end of the month, leading to increased market divergence, with the innovative and entrepreneurial sector leading declines while defensive dividend stocks stabilize. The profit-taking activity has not changed the yield level accumulated since the beginning of the year. According to the bank's calculations, from the beginning of 2026 to the end of July, the investment yield of insurance capital in equity funds is 2.5% (compared to 10.0% in the same period of 2025). The expected weighted dividend yield for the Shanghai and Shenzhen stock exchanges is estimated at 2.90%. According to ifind statistics, the weighted average ROE (TTM) of the CSI 300 in Q2 2026 is approximately 9.32% (compared to the previous value of 9.24%). This period, insurance capital as a major shareholder has increased circulation shares in sectors focused on railway and train equipment, as well as securities and brokerage. This period, the Ping An group did not engage in stake increases, while China Post Life Insurance increased its holdings in China Railway Signal & Communication Corporation twice, and Sunshine Insurance reduced its holdings in Qingsong Health. The top ten stocks with the highest frequency of insurance capital research in this period are: Eoptolink Technology Inc., Yuanjie Semiconductor Technology, Zhongji Innolight, Guangzhou Tinci Materials Technology, Montage Technology, Semitronix Corporation, Shenzhen Sunlord Electronics, Hangzhou Hikvision Digital Technology, Guangzhou Sanfu New Materials Technology, Huaqin Co., Ltd. Risk Warning: The calculation results are constrained by data availability and the reasonableness of assumptions, which carry a risk of deviation; macroeconomic recovery may be below expectations, and long-term interest rates may decline sharply; equity market volatility may increase.