Industrial Securities: Year-End Window Shows Non-Banking Sector Volatility as Key Signal for Market Rally

Industrial Securities Co., Ltd. released a research report stating that a key timing indicator for the non-banking sector is when its trading volume proportion drops to 2%. Historically, once the trading volume share of non-banking stocks falls to around 2%, external catalysts often trigger an outperformance rally. Additionally, historical patterns suggest that during the year-end to early-year window, abnormal movements in the non-banking sector (single-day gains exceeding 3%) frequently signal the start of a market upswing. Following such movements, the broader market tends to enter an upward phase.

Key takeaways from Industrial Securities' report include: 1. **Effective Timing Indicator**: A decline in the non-banking sector's trading volume to 2% has historically preceded outperformance rallies when paired with external catalysts. Recently, the sector's trading volume hit a low of 1.5%, but subsequent catalysts—such as the December 5 reduction in risk factors for insurance capital investments and the December 6 proposal by Chairman Wu Qing to "appropriately expand capital space and leverage limits for brokers"—have reignited the sector's rally.

2. **Year-End Signal**: Non-banking volatility (≥3% single-day gains) during the year-end transition period often serves as a critical signal for market momentum. As a barometer of market sentiment, sharp movements in this sector can significantly boost confidence during a season prone to rallies.

3. **Historical Trends**: Among 15 year-end periods since 2010, seven market rallies began alongside non-banking sector volatility. Post-volatility, the broader market typically rises—averaging gains of 6.8%, 9%, and 12.8% over the subsequent 10, 20, and 30 trading days, respectively.

4. **Sector Performance**: In the 20 trading days following non-banking volatility, indices like the SSE 50, CSI 300, and CSI 1000 tend to outperform. In terms of style, large-cap growth and value stocks lead, while sectors such as non-banking, metals, building materials, computers, and coal show relative strength.