Market Summary:

Financial Index Weekly Report 2018/12/10

Last week, there was generally increase over the market. SSE Composite Index (000001.SH) changed 0.68 % to 2605.89. Specifically, small cap shares perform better than large cap shares and we can observe that CSI500 did better than SSE50(0.78% vs 0.11%).

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, short-term (1M) spread experienced obvious rise, 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 some appreciation for both inland and offshore rates, that CNY/USD changed -0.92% (up to 16:30 of last Friday) and CNH/USD changed -0.93%.

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 12.58 billion CNY and the cumulative net inflow was 638.17 billion CNY at last Friday, and reached another historical new high. Specifically, more fund inflow in Shanghai market than Shenzhen market.

In sum, the market experienced some rebound. However, most of the rebound was contributed in Monday, immediately after the previous weekend, when Xi and Trump reached agreement about trade conflicts. During the following period of the week, the market dropped. It still need time to fully get out of the bottom region.

News:

(1) China Foundation News:In the last month of 2018, the capital-guaranteed fund will be transformed to maturity intensively. In the next 10 months, the last 50 stock capital- guaranteed funds will expire one after another, and this product is on its way to the end. Industry insiders believe that under the trend of breaking guaranteed payment by new regulations of capital management, the main direction of capital- guaranteed fund disposal will still be to cancel the joint and several liability guarantee mechanism by adding new rules of hedging strategy fund.

(2) The Shanghai Stock Exchange, Shenzhen Stock Exchange and Hong Kong Stock Exchange has reached a consensus on the specific scheme of incorporating different voting rights structure companies into Hong Kong Stock Exchange. Next, the 3 exchanges will work out relevant rules and publish them to the market after completing the necessary procedures. It is expected that the rules will come into effect in mid-2019. Up to now, among the companies that have completed listing on the Hong Kong Stock Exchange, only Mi and Meituan are the companies with different voting rights structure. The above notification means that mainland investors can buy and sell the shares of the two companies through Shanghai, Shenzhen and Hong Kong Stock Connects in the future.

(3) In November, China's CPI rose by 2.2%, expected by 2.4% and its pre-value by 2.5%, while the ring-to-ring ratio fell by 0.3% and the pre-value rose by 0.2%. In November, China's PPI rose by 2.7%, expected by 2.7% and its pre-value by 3.3%, while the ring-to-ring ratio dropped by 0.2% and the pre-value increased by 0.4%. Statistics Bureau: CPI fell, food prices fell 1.2%, it impacts about 0.25 percentage points, affected by the African swine plague as part of the regions speed up the slaughter to avoid risks then pork prices fell 0.6%, which impact CPI dropping by about 0.01 percentage points.

(4) China's trade surplus in November was 306.04 billion yuan, expanding by 21.5%, with an expected value of 214.1 billion yuan and a pre-value of 233.63 billion yuan. From January to November, the trade surplus was 1.96 trillion yuan, narrowing by 21.1%.