The recent rapid rise in the banking sector has left even industry insiders somewhat puzzled about the reasons behind it.
But this is the reality: a number of banks, including Shanghai Pudong Development Bank, Shanghai Bank, Jiangsu Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, Chengdu Bank, China Construction Bank, and Bank of China, have all reached their highest points since being listed on the A-share market.
Taking Industrial and Commercial Bank of China as an example, its latest adjusted price has exceeded 7.2 yuan, well above the peak stock price when the Shanghai Composite Index was at 6000 points (see the chart below).
This is just a glimpse of the recent surge in bank stocks.
The A-share banking index compiled by WIND (covering 42 listed banks in the A-share market) recently reached a historical high, and the total market capitalization of the A-share banking sector surpassed 10 trillion yuan during trading.
After a long period of being &#34;questioned,&#34; &#34;undervalued,&#34; and &#34;ignored,&#34; bank stocks seem to have truly entered an unprecedented &#34;value discovery journey.&#34;
For the A-share market, the adjustment of the &#34;valuation center&#34; for such a large industry worth trillions will undoubtedly be a significant and impactful matter.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/458d64f3-fbd8-4d05-98cf-7ab6ae7b5915.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/458d64f3-fbd8-4d05-98cf-7ab6ae7b5915.png"/>
<h2>&#34;Iron Tree&#34; Blossoms</h2>
On May 14, 2025, the banking sector in the A-share market reached a milestone moment—its total market capitalization surpassed 10 trillion yuan, setting a historical high (see the chart below).
This figure not only signifies the further consolidation of the banking industry's core position in the national economy in recent years but also reflects that under the combined efforts of multiple market forces, bank stocks, representing the &#34;large financial sector,&#34; are facing an unprecedented &#34;revaluation opportunity.&#34;
Taking Industrial and Commercial Bank of China as a representative example, this stock, listed in October 2016, is now entering its 20th calendar year.
Over the past nearly 20 years, ICBC has increased by 7.16 times from its lowest price in 2016 (i.e., growing to 8.16 times its lowest price).
If we roughly divide ICBC's 20-year market performance into three doubling phases (excluding the super volatility during the 6000-point period):
Approximately, the first nine years (before the end of 2014) saw the first doubling;
The next eight years (before the end of 2022) saw the second doubling;
Then, within the next three years, the third doubling occurred.
Some bank stocks have quietly achieved &#34;price discovery.&#34;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ae2554e9-8a3b-4269-b557-33c8ab03c813.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ae2554e9-8a3b-4269-b557-33c8ab03c813.png"/>
<h2>Policy &#34;Dividend Effect&#34;</h2>
From a market perspective, the &#34;revaluation&#34; of bank stocks aligns to some extent with the current era of economic development.
There is a view that the rapid valuation recovery of bank stocks in this round began with the policy shift in 2023.
On one hand, as the risks in the real estate sector gradually &#34;clear,&#34; policy measures such as &#34;three not lower&#34; targeted financial support for real estate companies and the acquisition and replacement of implicit debts for affordable housing have significantly improved the expected quality of bank assets
On the other hand, the introduction of the &#34;New National Nine Articles&#34; in 2025 has elevated the emphasis on investor returns to a significant level. Various regulations advocate and emphasize the importance of dividends and shareholder returns for listed companies, which aligns well with the high dividend characteristics of bank stocks.
Thirdly, after the revision of the &#34;Insurance Fund Utilization Management Measures,&#34; the risk factors for insurance investment in equity assets have been relaxed, and models such as OCI can be used for cost accounting of long-term held equity assets. This has driven a surge in demand for insurance capital allocation to bank stocks. In the first half of 2025 alone, there have been at least five instances of insurance companies increasing their stakes in bank stocks.
<h2>A Tool for &#34;Stabilizing Market Expectations&#34;</h2>
Another noteworthy situation is the active market entry of &#34;stabilization funds&#34; represented by Central Huijin in recent years, which has stabilized market expectations.
This has likely led to at least 1 trillion yuan in new subscriptions directed towards various broad-based ETFs represented by the CSI 300 Index ETF.
As is well known, the financial sector, represented by banks, occupies a significant proportion of these broad-based ETFs.
Taking the largest index fund in the industry, the Huatai-PB CSI 300 ETF (510300), as an example, this fund held 81.8 billion yuan in various financial stocks at the end of the first quarter in recent years, accounting for 24% of the fund's portfolio.
In other words, for every 4 yuan in new subscriptions, 1 yuan is directed towards the large financial sector.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/36f12bee-00be-4f2d-a703-a0ea3fb2ffba.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/36f12bee-00be-4f2d-a703-a0ea3fb2ffba.png"/>
<h2>The &#34;New Assessment Mechanism&#34; for Public Funds Cannot Be Ignored</h2>
Another potential significant influencing factor is the reform of the assessment mechanism for public funds.
According to the recently released &#34;Action Plan for Promoting the High-Quality Development of Public Funds,&#34; future assessments of actively managed equity funds will be closely tied to &#34;long-term benchmark performance.&#34;
This means that investment styles that previously disregarded the &#34;benchmark&#34; index may face challenges, and more fund managers are beginning to pay attention to their net value in comparison to the benchmark.
This could likely encourage fund managers to focus on investments in financial stocks and bank stocks.
Taking the commonly referenced CSI 300 Index as an example, at the end of the latest quarter, the weight of large financial stocks accounted for 24%. The tens of trillions of actively managed equity funds that have long underweighted bank stocks may &#34;reassess&#34; their investment in financial stocks.
<h2>Public Funds Are Overly &#34;Cold&#34; in Allocation</h2>
So how much of a shortfall is there in public funds' allocation to bank stocks?
According to a research report from Huafu Securities: from the individual stock perspective, actively managed equity public funds are currently underweight in the vast majority of bank stocks.
Data shows that by the end of 2024, the allocation of actively managed equity public funds to A-share listed banks accounted for only 2.97% of their total market value, far below the weight of banks in the performance comparison benchmark represented by the CSI 300.
Kaiyuan Securities has provided data on &#34;under-allocation&#34; this year: as of the end of March this year, the proportion of bank stocks in actively managed equity holdings was 3.75%, which is about 10 percentage points lower than the CSI 300
Huatai Securities also pointed out the key under-allocation directions: actively managed equity funds are significantly under-allocated in the banking sector, especially in state-owned banks.
Among them, the proportion of actively managed equity public funds heavily invested in the banking sector is 3.8%, which is significantly lower than the weights of 13.7% and 9.7% in the CSI 300 and CSI 800 indices, respectively.
This sell-side team estimates that for component stocks in the CSI 300 such as China Merchants Bank, Industrial Bank, ICBC, Bank of Communications, Agricultural Bank of China, and Shanghai Pudong Development Bank, the deviation in holdings by actively managed equity funds is over 0.5%, corresponding to an under-allocated capital of 8 to 21 billion yuan.
Changjiang Securities recently believes that in the process of systematic valuation repair in the banking sector, the pursuit of dividend assets by funds and the factors of index weight will jointly drive the rise of related bank stocks.
<h2>Private Equity Low Allocation &#34;Evenly Matched&#34;</h2>
Zhi Shi Tang noted that actively stock-picking private equity funds are also in a low allocation state regarding banks.
Statistics from China Resources Trust show that as of the end of March 2025, the five major industries prioritized by large-scale stock private equity funds are capital goods, consumer goods, materials, technology equipment, and food and beverages, with the banking sector ranking eighth, corresponding to a proportion of less than 3%, lower than the same period in 2024.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/fdf15745-365e-4863-b0ed-d384ad2258c8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/fdf15745-365e-4863-b0ed-d384ad2258c8.png"/>
As mentioned above, the proportion of actively managed equity public products heavily invested in the banking sector is 3.8%, slightly ahead of private equity peers.
<h2>Most Private Equity Stars &#34;Do Not Favor Banks&#34;</h2>
Looking at the group of fund managers in China, there are several star fund managers who became famous for heavily investing in banks, but the current investment focus has long shifted.
Among public fund managers, Dong Chengfei, who was a key player at Xingquan Fund, received high praise early in his investment career for his foresight in heavily investing in bank stocks. However, the latest private equity products he manages have shifted their allocation towards semiconductors.
Among domestic value fund managers, there are not many who can allocate a certain weight to bank stocks, and historically, those who preferred bank stocks, such as Qiu Dongrong, have also exited the public fund front line early.
Currently, it seems that among domestic fund managers, only a few, such as Wang Mingxu from GF Fund, consistently maintain a certain allocation to bank stocks. Fund quarterly reports show that Wang Mingxu's GF Domestic Demand has consistently maintained around 30% allocation to bank stocks.
In the private equity industry, there are few fund managers who consistently maintain a clear allocation to bank stocks, mainly represented by minority investors such as Zhou Liang and Qiu Guolu from Gao Yi Asset.
Among them, Zhou Liang revealed during a roadshow earlier this year that large-cap blue-chip stocks are a direction for allocation this year, as the market's risk-free return rate is rapidly declining, highlighting investment value. This includes banks, home appliances, and automobiles.
In private equity institutions, there are also fund managers who explicitly state that they &#34;abandon&#34; bank stock allocations. Li Bei from Banxia Investment is one such example.
In May, she pointed out that due to relevant factors, the current risk of holding bank stocks outweighs the benefits. Over the past year, Banxia Investment held over 10% in bank stocks, but recently has reduced most of its positions, with plans to eventually reduce it to 0 when the opportunity arises
Whether the strong performance of bank stocks can be sustained remains to be seen, but the process of institutional investors, represented by public funds, re-evaluating the allocation value of financial stocks may have inevitably begun.
Risk Warning and Disclaimer
The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk

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Recently, the banking sector has rapidly risen, with several banks reaching their highest points since listing on the A-share market, and the total market value surpassing 10 trillion yuan. Taking ICBC as an example, its stock price has exceeded 7.2 yuan, indicating the value discovery journey of bank stocks. Market analysis suggests that the revaluation of bank stocks is closely related to economic development, reflecting the further consolidation of the banking industry's core position in the national economy

- The recent surge in bank stocks has led to record highs for several major banks in China's A-share market, with the total market capitalization surpassing 10 trillion yuan.  
- This increase is attributed to improved asset quality expectations following policy shifts and a focus on shareholder returns, alongside significant investments from insurance funds.  
- The ongoing revaluation of bank stocks reflects their growing importance in the national economy, although institutional investors have historically underweighted this sector.

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Trillion-dollar bank stocks "market value skyrocketing," public and private funds "caught off guard"?