Market review:

China stocks stayed firm on the last trading day of year 2016 with SHA barely hold 3100.

Research Notes:

The stock index climbed about 0.24% with money flowed into Wine Brewing, Environment Protection and Real Estate sectors the most.Hainna Lawton Development Co.(600209), a real estate developer based in Hainan rallied to limit-up as investors believe the firm would benefit from the gov’s new year econ plan meeting to be held in Q1 2017, which will address the land trading issues.

DXY overnight dropped to 102.5 level with several US macro econ reading fell below the expectation and damped the probability for Fed to take further move in Q1.CNYUSD stayed around 6.94 and it’s very likely it would break 7 threshold in Q1 2017 despite the recent setback of USD, as liquidity would surge after the holiday season. The short term shibor also dropped for recent liquidity injection from PBOC. In commodity market, rubber, gold and coke led the rally, mostly supported by weakening USD, while plastic and methanol fell the most with speculators closed position before the new year holiday, which could be only a move of the short term.As the time to plan for the new year came, we recommend investors overweight agriculture, SOE reform and environment protection sectors, which would benefit the most from the gov conference planned in Q1. SHA could resume the rally to 3200 above but mostly after the spring festival, so some alpha hedge could be used to protect the downside for the next 2~3 weeks.