This week, the A-share market experienced overall valuation expansion, with the nonferrous metals sector leading the gains. Amid a global liquidity glut and persistently tight supply of nonferrous metals, prices of gold, silver, copper, platinum, and other metals hit record highs, boosting sentiment in the sector. The overall PB (LF) for the nonferrous metals industry is currently at the 84.4th historical percentile. Within the sector, the historical percentiles for industrial metals, precious metals, and minor metals are 89.1%, 77.1%, and 69.3% respectively, indicating valuations have not yet reached extreme levels. Valuations expanded for both the main board and the STAR and ChiNext markets. The relative valuation for computing infrastructure, excluding operators and resource companies, also expanded. The relative PE (TTM) for this segment rose from 4.28 times last week to 4.39 times this week, while the relative PB (LF) increased from 4.46 times to 4.58 times. Observing the historical percentiles of absolute and relative valuations across sectors: (1) From a static PE (TTM) perspective, among major sectors, discretionary consumption, major consumption, midstream manufacturing, cyclical sectors, and midstream materials all have absolute and relative valuations above the historical median. Notably, discretionary consumption and midstream manufacturing have absolute and relative valuations above the 90th historical percentile. In contrast, financial services, services, and consumer staples have relative valuations below the 10th historical percentile. (2) From a PB (LF) perspective, among major sectors, resources, TMT, cyclical sectors, and midstream manufacturing have absolute and relative valuations above the historical median. Conversely, discretionary consumption, financial services, services, major consumption, and consumer staples have absolute and relative valuations below the historical median, with major consumption and consumer staples showing relative valuations below the 10th historical percentile. (3) From a full dynamic PE perspective, among major sectors, discretionary consumption, midstream manufacturing, cyclical sectors, and midstream materials all have absolute and relative valuations above the historical median. Specifically, discretionary consumption and midstream manufacturing have absolute valuations above the 90th historical percentile. Consumer staples, however, have both absolute and relative valuations below the historical median, with its relative valuation falling below the 10th percentile. A comprehensive comparison of odds (PB historical percentile) and probability of winning (ROE historical percentile) reveals that sectors such as agriculture, forestry, animal husbandry & fishing, utilities, and non-bank financial institutions currently exhibit characteristics of both low valuation and high profitability. A comprehensive comparison of odds (full dynamic PE) and probability of winning (25-26 consensus expected net profit compound growth rate) indicates that building materials, power equipment, media, and defense military industry currently combine low valuations with high earnings growth rates. This week, the attractiveness of stocks relative to bonds declined: the A-share non-financial equity risk premium (ERP) decreased from 0.89% last week to 0.81% this week; the stock-bond yield spread narrowed from -0.05% to -0.14%. The full dynamic ERP for key A-share non-financial companies also fell from 2.8% last week to 2.68% this week. Risk warnings: Strategic views do not represent the industry; valuation levels do not indicate stock price trends; the profit environment is subject to unexpected fluctuations.
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