Market Summary:

Last week, there was generally decrease over the market. SSE Composite Index (000001.SH) changed -3.72 % to 2579.48. Specifically, small cap shares perform much worse than large cap shares and we can observe that CSI500 did much worse than SSE50(-6.1% vs -2.53%).

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 except for some rise of the short-term spread. As for the spread between Shibor Rates and Treasury bonds yield, after longer terms (6M, IY) of them experiencing obvious rise last week, they now hold an upward-term structure. As for treasury bond yield, they almost keep the term-structure of the previous Friday. The interest rates are still at relatively low level.

As for exchange rate, there were divergences between inland and offshore rates that CNY/USD decreased -0.08% (up to 16:30 of last Friday) and CNH/USD increased 0.33%.

As for foreign fund flows via both Shanghai and Shenzhen-Hong Kong Stock Connect, last week there were both net outflows for Shanghai and Shenzhen markets. The net outflow over last week was -2.20 billion CNY and the cumulative net inflow was 614.61 billion CNY at last Friday. Specifically, more fund outflow in Shanghai market than Shenzhen market.

In sum, as we mentioned previously, the rebound is not so easy, as current monetary situation does not support totally growth. Also in recent weeks, we observed significantly higher volatility for small cap shares (e.g. CSI500 rose and dropped for more than 6% in past 2 weeks). We expect that A-shares would keep fluctuation in current low area for some time, with small cap share more volatiled.

News:

(1)Dazhong Securities News: the repurchase enthusiasm of listed companies continues to heat up. Since November, 203 companies have taken out real money and repurchase shares. The number of repurchases reached 1.763 billion shares, costing 14.381 billion yuan. For the reasons of repurchase, most of these companies believe that the stock price of the secondary market deviates from the company's value and failed to reflect the actual operation of the company and the growth momentum of future performance.

(2)Shanghai Securities News: the Banking and Insurance Regulatory Commission officially approved the preparation of Allianz (China) Insurance Holding Co., Ltd. by Allianz Group of Germany. The insurance holding company will become the first newly established foreign insurance holding company in China, registered in Shanghai. Allianz Group expects that Allianz (China) Insurance Holding Company will be formally established in 2019.

(3)The report of Renmin University of China: In 2018, China's macro-economy showed a trend of "sustained slowdown" in the "stable and changeable". It is estimated that the real GDP growth rate will be 6.6% in the whole year, basically realizing the government's intended economic growth target. It is estimated that the real GDP growth rate will be 6.3% in 2019 and the CPI will increase by 2.4% in the whole year.

(4) First Finance: several high-tech enterprises in Shanghai have revealed that they have received the Information Collection Form for High-quality Enterprises of Kechuang Board issued by relevant departments recently, requiring that R&D investment and patent number be included in the specific indicators of the list of enterprises.

(5) Shanghai Securities News: to guard against the risk of goodwill impairment of listed companies, the fund keeps a close eye on earnings and evades performance black swan. Some fund managers say that they often choose to sell stocks with high goodwill around New Year's Day and buy them back after the annual report is published so as not to encounter the "landmine" in the financial statements of listed companies. There are also fund managers in combing individual stocks, the financial statements will be carefully studied, in order to avoid risk ahead of time.