Market Summary:

Last week, there was generally increase over the market. SSE Composite Index (000001.SH) changed 1.65 % to 2596.01. Specifically, large cap shares perform better than small cap shares and we can observe that SSE50 did better than CSI500 (2.67% vs 0.76%).

As for the overall market valuations, they remain at low level in a longer historical view. However, with the market rebound, the valuation also rebound in some extent.

As for Credit spread between A-rate corporate bonds, a small drop for all spreads are observed. As for the spread between Shibor Rates and Treasury bonds yield, short-term (1M) spread experienced obvious increase. As for treasury bond yield, last week, both short-term yields and long-term yields of treasury bond experienced some small fluctuation.

As for exchange rate, there were some depreciation for both inland and offshore rates, that CNY/USD changed 0.33% (up to 16:30 of last Friday) and CNH/USD changed 0.62%.

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 17.03 billion CNY and the cumulative net inflow was 675.87 billion CNY at last Friday, another historical new high. Specifically, more fund flow in shanghai market than Shenzhen market.

In sum, the market kept experiencing some rebound. Furthermore, there is still huge foreign fund net inflow via Stock Connect Program and this comfirms the rebound of market confidence.

News:

(1) Li Keqiang chaired a symposium to listen to the opinions and suggestions of people from education, science and technology, culture, health, sports and grass-roots mass representatives on the Government Work Report (draft for comments). Li Keqiang said that we should better stimulate the creative potential of scientific researchers, strengthen basic research and break through the bottleneck technology that restricts development. We should seize the opportunity to organize the Beijing Winter Olympic Games and promote the level of ice and snow sports in China. We should improve agricultural support policies, strengthen the protection of origin and brand identification, and promote the development of green and high-quality agricultural products in China. Create conditions for farmers to earn money. Encourage and support more young people with lofty ideals to become new type of professional farmers and achieve their career in the vast countryside.

(2) Economic Reference Daily: the Spring Festival Travel officially opened in 2019 and ended on March 1 for 40 days. This year's Spring Festival Transport is expected to send 2.99 billion passengers nationwide, an increase of 0.6% over the previous year. Among them, railway and civil aviation are expected to send passengers to a new high in spring transportation.

(3) According to CME's "Fed Observation": the probability that the Fed will maintain interest rates in the range of 2.25% to 2.5% in January this year is 99.5%, the probability of interest rate increase and interest rate reduction is 0.5% and 0%, respectively; the probability of interest rate maintenance in March this year is 94.3%, the probability of interest rate increase and interest rate reduction is 5.7% and 0%, respectively.

(4) According to the front-page article of the Economic Reference Daily, central government will continue to innovate and improve macro-control in accordance with the principle of "no flooding". It will enrich and be good at using macro-policy tools to hedge the uncertainty of the external environment with the stability, pertinence and effectiveness of macro-policy, and maintain the economic operation in a reasonable range.

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