Market review:

China stocks declined with SHA fell about -0.3%.

Research Notes：

Money outflowed from Software Development, Electronic Devices, Construction sectors the most. Beijing Metro Land Corporation LTD(600683) rallied to limit-up as The stock terminated a restructure plan and resume trading.

In forex market, DXY lost the momentum to go beyond 97 and held 97.1 level as recent data showed that the economy growth in US is not that strong as expected. CNYUSD weakened and fell to 6.80 level yet the currency had appreciated this year despite two Fed rate hikes. The relative weak USD also damped the intention for Chinese investors to sell RMB for US dollar. Investors also wanted to hold more RMB as the inter-bank RMB tightness continued with Shibor rates stayed high. In commodity market, methanol, coke, egg rallied the most as investors did some bargain hunting for methanol and coke. For chicken egg futures, the price rebounded as farmers sold many laying hen due to low egg prices and the supply of egg reduced to hit a balance. The recent heat waves in Northern China also affected some egg production. As the money tightness still an issue for June, we estimated that SHA could dip towards 3100 level for the next several week, investors can hedge the downside risk with index futures accordingly. We still favored stock of “One Belt One Road”, some large cap stocks benefit from SOE reform and new energy firms. We considered SHA 3000~3050 could be a safer region to load up shares. Option investors can also bet that volatility for 50ETF would stay low into Q3.