China fundamental:

China stocks rallied on with SHA climbed about 0.62%.Despite another disappoint reading of China Caixin PMIs data, which in a trend of decline.

Research Notes:

Money flowed into Construction, Aviation and Power Generation sectors, on hope of flood damage could boost demand for contraction in rebuilding of property, the tension between air forces of China and Japan on the disputed air zone and sufficient precipitation increase the output of Power Generation companies, especially for those hydroelectricity generation firms.

Inner Mongolia Xingye Mining(000426.sz), an iron ore and non-ferrous metals miner, rallied to limit-up for the recent strong performance of iron ore and other metals.

The selling of CNYUSD also supported the strength of many metals and RMB fell to multi-year low against USD, increased the cost for China to import many raw materials.In commodity market , rice,silver and nickel futures took the lead, but as weather improved for Yangtze River, both soybean meal and rapeseed meal futures slumped to limit-down and affected the overall sentiment of agri-commodities. But this selling, in our opinion, also created some opportunities to load some agri-futures, as July and August are seasonally supportive to commodities, from soy complex to egg.For SHA, we rasied the mi-term target to 3100 as risk appetite recovered and we still hold the belief that commodity over all should outperform equity in the next 2~3 months.

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