Market review:

China stocks declined with SHA fell about -0.77%.As the rebound of A-share in quarter 1st meet the expectation of regulators .Since mid of April, gov strengthen supervision to response the call of ensuring the financial safety, implementing the sweeping check system for hidden dangers before China nineteenth National Congress.

Research Notes:

Money outflowed from Software Development, Construction, Metal Product sectors the most. Arcplus Group PLC(600629) rallied to limit-up twice as Investors speculated that this real estate developer could be enrolled into the construction project of Xiongan New District. Some investors stick to this group of shares as they believed that more supportive policies to be released in the future and could benefit those construction firms.

DXY fell toward 98.8 level as Fed signaled no immediate hike of the interest rate, yet some support also founded for DXY as investors preparing for the France Presidential Election Round 2 this week end. CNYUSD stayed weak at 6.89 level as recent data showed that China Economy may lose some steam in Q2 with PMI weakening and regulators suppressed the financial industry, and forced many asset managers to reduce their exposure in both bonds and stocks as the regulation tightening as Gov showed clear intention that the high leverage in both financials and real estate markets is not welcome. In commodity market, Corn Starch, Ferrosilicon, Aluminum rallied the most as investors prefer some agriculture positions over industrial metals which mostly hurt by the curb of the real estate market. Iron ore and coal fell to limit-down with concern that the cooling of real estate speculation could reduce demand for these raw materials. For commodity options, as soybean into the weather theater, the volatility rebounded as investors pricing in the weather premium yet in our opinion in a weak el nino scenario good harvest is still more likely, OTM calls hereby are good to sell. Sugar options showed even low IV as the crop facing less weather threat than soybean for this season, so the further months OTM calls are even better to short. As the Gov’s high pressure on finance market could go on into Q3, we suggest investors to only expose to consumer staples, such as food and beverage, also medicine firm with good profit, the index futures and 50ETF puts could be used as a hedge for the downside. SHA could stay around 3100 as the recent un-accommodative regulation continues.