Market Summary:

Last week, there was generally huge decrease over the market. SSE Composite Index (000001.SH) changed -7.60 % to 2606.91.

As for the overall market valuations, they remain at 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 0.61% (up to 16:30 of last Friday) and CNH/USD increased 0.62%.

As for foreign fund flows via both Shanghai and Shenzhen-Hong Kong Stock Connect, last week there were both net dramatic outflows for Shanghai and Shenzhen markets. The net inflow over last week was -16.97 billion CNY and the cumulative net inflow was 572.24 billion CNY at last Friday. Specifically, more outflow in Shanghai market than Shenzhen market.

In sum, last week, followed by global market decrease during National Day holidays, the A shares experienced a general decrease. The huge foreign fund outflow reflected the current pessimistic views over the market.

News:

According to the official website of the central bank, central bank governor Yi Gang said at the G30 International Banking Symposium in 2018 that there is still considerable room for monetary policy instruments, including interest rates, reserve ratio and monetary conditions. Given that the Fed is raising interest rates, the level of interest rates in China is appropriate, and the tools are adequate to deal with uncertainty. In order to solve the structural problems in China's economy, we will speed up domestic reform and opening up to the outside world, strengthen the protection of intellectual property rights, and consider the principle of "competitive neutrality" in dealing with state-owned enterprises. We will vigorously promote the opening up of the service sector, including the opening up of the financial sector. In response to questions, Yi Gang said that China's overall leverage ratio had stabilized last year and this year and was no longer rising rapidly. This is a result we have achieved. In the near future, we have lowered the reserve requirement ratio or introduced other instruments with the basic aim of providing sufficient liquidity to the financial system. Other indicators such as M2 and social financing scale increased moderately. So, it is appropriate that we inject liquidity into the financial system, and leverage levels will continue to be stable, note that we're talking about stable leverage.

Liu Shiyu, chairman of the CSRC, held talks with shareholders this afternoon (Oct 14) to listen to views on the development of the capital market. He said at the scene that some of the ideas could be absorbed into the policy. He also said that spring is not far away.

The Financial Secretary of Hong Kong said it was inevitable that interest rates would continue to rise next year and that the US interest rate hike was expected to continue; the Federal Reserve's monthly balance sheet reduction, which began last October, would continue. This has implications for both the dollar exchange rate and global interest rates and is challenging for some emerging markets that issue more dollar debt. Hong Kong's ultra-low interest rate era will not only end but may also step into a gradual interest rate hike, and the risk of the asset market cannot be ignored.