Summary:

Weekly Report 2018/10/08

Last week, there was generally increase over the market. SSE Composite Index (000001.SH) changed 0.85 % to 2821.35. Specifically, from the view of index, the shares with high market cap perform better than that with low market cap. This can be reflected the major index performance that SSE50 did better than CSI300 and the latter one did better than CSI500.

As for the overall market valuations, they remain at still low level in a longer historical view.

Credit spread between A-rate corporate bonds and treasury bond almost unchanged. As for the spread between Shibor Rates and Treasury bonds yield, all terms (1M,6M, IY) of them experienced little fluctuations and keep its inverse term structure. As for treasury bond yield, there was a slightly increase for short term yield. The interest rates are still at relatively low level.

As for exchange rate, there were depreciation for both inland and offshore rates, that CNY/USD increased 0.62% (up to 16:30 of 2018/9/28) and CNH/USD decreased 0.45%(up to 2018/9/28).

As for foreign fund flows via both Shanghai and Shenzhen-Hong Kong Stock Connect, last week there were both net inflows for Shanghai and Shenzhen markets. The net inflow over last week was 6.39 billion CNY and the cumulative net inflow was 589.21 billion CNY at last Friday, another historical new high. Specifically, more inflow in Shanghai market than Shenzhen market.

In sum, last week, the market showed obvious confidence with continuous foreign fund inflow and remain the general trend of creating new high for cumulative fund inflow.

News:

According to the World Trade Organization's World Trade Report 2018 released on October 3, digital technology will help cut trade costs substantially and accelerate global trade growth over the next few years, Xinhua reported. The report predicts that digital technology, including the Internet of Things, artificial intelligence, 3D printing, block chains and so on, will have a profound impact on global trade. While reducing trade costs and improving production efficiency, it is expected to contribute about 2 percentage points annually to Global trade growth.

Services and developing countries are expected to be the biggest beneficiaries of digital technology by 2030, according to the report. The share of trade in services in Global trade is expected to increase from 21% in 2016 to 25% in 2030, while the share of developing and least developed economies in Global trade is expected to rise from 46% in 2015 to 57%.

Russian President Vladimir Putin: our goal of balancing the oil market with OPEC has been achieved, and the rise in oil prices is due to Iranian sanctions; if oil prices are between $65 and $75 a barrel, we will be satisfied; we have increased production by 400,000 barrels a day, and if necessary we can continue to increase production by 200,000 barrels to 300,000 barrels a day.

Goldman Sachs: with Iran's rival oil producers likely to struggle to fill all the gaps in Iran's exports, crude oil could stand at $80 a barrel by the end of the year.

To further support the development of real economy, optimize the liquidity structure of commercial banks and financial markets, reduce financing costs, and guide financial institutions to continue to increase support for small and micro enterprises, private enterprises and innovative enterprises. The People's Bank of China (PBOC) has decided to the reserve ratio of RMB deposits of large commercial banks, joint-stock commercial banks, urban commercial banks, non- county rural commercial banks and foreign banks will be reduced by 1 percentage point since October 15, 2018. The MLF due on that day will not be continued. It can release additional funds of about 750 billion yuan. Officials of the central bank said that the reduction is still a targeted regulation, the total liquidity of the banking system is basically stable, the monetary policy orientation has not changed. Some of the funds released by the reduction are used to repay the MLF, which is a substitute for two liquidity adjustment instruments, while the remaining funds are hedged against the tax period in mid-late October. Therefore, while optimizing the liquidity structure, the total liquidity of the banking system remains basically unchanged. The People's Bank of China will continue to implement a sound and neutral monetary policy, without flooding, focusing on directional regulation and control, maintaining reasonable and abundant liquidity, guiding the rational growth of monetary credit and social financing, and creating a suitable monetary and financial environment for high- quality development and supply-side structural reform. This reduction makes up for the liquidity gap of the banking system, optimizes the liquidity structure, the bank has not relaxed, the market interest rate is stable, the broad money (M2) and social financing scale growth rate basically matches the nominal GDP growth rate, is reasonable and moderate, and will not form depreciation pressure of RMB.