Important Signal: The securities index has declined for ten consecutive weeks, setting a new record! Valuations are at historic lows.

Sector valuations are at historical lows.

Today (March 27), the securities index (801193) once again set a new intra-year low. During the session, it briefly dipped below 5,900. As of the close, the securities index closed at 5,943.07, up 0.65%. Although it rebounded today, the securities index’s weekly decline still came close to 4%, marking a tenth consecutive week of losses.

With the securities index logging a ten-week losing streak, it has already broken the historical record by a large margin. Previously, the securities index had only once recorded an eight-week losing streak, from February 13, 2008 to April 3, 2008. In addition, there were three instances of seven-week losing streaks, occurring in 2018, 2011, and 2001, respectively.

It is worth noting that historically, after the securities index has fallen for more than 6 weeks in a row, a strong rebound is generally seen within one month; this was especially evident in 2008 and 2011. Data show that there have been 11 instances in which the securities index experienced a losing streak of 6 weeks or more. Among them, in 8 cases, after several consecutive weeks of declines, the index showed a cumulative upward trend within one month. The probability of a rebound after the losing streak is close to 73%, and the average gain exceeds 10%.

At present, the securities index’s valuation has already fallen to a historical low level, also building momentum for the subsequent rebound. Specifically, the securities index’s current trailing price-to-earnings ratio is about 15 times, only around the 6th historical percentile. Its price-to-book ratio is about 1.2 times as well, also around the 5th historical percentile, highlighting the characteristics of being undervalued.

Galaxy Securities said that the sector’s valuations are currently at historical lows, with both defensive capabilities and rebound strength on the offense and defense side. Investors should focus on three aspects: first, leading securities firms with strong overall strength; second, mid-to-large securities firms that have differentiated competitive advantages in business areas such as wealth management, proprietary trading, and cross-border operations; and third, small and medium-sized securities firms with high-earnings-volatility expectations.

(Source: Data Bao)