Market Summary:

Last week, there was generally small increase over the market. SSE Composite Index (000001.SH) changed 0.22 % to 2601.72. Specifically, large cap shares perform better than small cap shares and we can observe that SSE50 did better than CSI500 (1.00% vs -0.68%).

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

As for Credit spread between A-rate corporate bonds, a small rise for all spreads are observed. As for the spread between Shibor Rates and Treasury bonds yield, short-term (1M) spread experienced some fluctuation. 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 appreciation for both inland and offshore rates, that CNY/USD changed -0.10% (up to 16:30 of last Friday) and CNH/USD changed -0.73%.

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 9.58 billion CNY and the cumulative net inflow was 685.45 billion CNY at last Friday, another historical new high. Specifically, more fund flow in Shenzhen market than Shanghai market.

In sum, the market kept experiencing some rebound. However, there are divergent performance that large cap shares perform better while small cap shares experienced some drop. The foreign fund keeps inflow and show confidence about the market so the prospect should not be pessimistic.

News:

(1). First Finance and Economics: Most institutions predict that the stock market will be mainly volatile. After the first quarter of 2019, the disclosure of annual reports and external uncertainties of listed companies have been further clarified, the market will find its bottom and hopefully come out of a rising market. Especially for foreign capital with long-term allocation demand for A shares, the current valuation of A shares is double the standard deviation below the average of the past five years, which is attractive to overseas long-term value investors.

(2).Economic Daily: In 2019, there is no need to worry too much that inflation pressure will become the main contradiction of China's economic operation, nor to overreact to deflationary risk; international commodity prices are downward trend, and inflationary pressure of importation is relatively low; investment demand and consumption demand are weak, and the pull of prices is not strong; monetary policy is stable, and there is no overflow of liquidity, thus raising prices.

(3) The State Council decided to appoint Comrade Yi Huiman as Chairman of the China Securities Regulatory Commission and to remove Comrade Liu Shiyu from the Chairman of the China Securities Regulatory Commission. Comrade Liu Shiyu has another appointment. After Liu Shiyu resigned as chairman of the CSRC, he went to the China Supply and Marketing Cooperative as Deputy Secretary of the Party Group and director of the Council. According to Securities China, the market is looking forward to Yi Huiman's first show. He has made a public statement about the capital market. When it comes to regulation, Yi Huiman believes that, on the one hand, the fundamentals of China's economic stability and improvement have not changed. On the other hand, China's economy is changing from a stage of high-speed growth to a stage of high-quality development. Financial market reform has been deepening and positive results have been achieved in the governance of financial chaos. It will reconstruct the financial ecological environment from multiple dimensions.

(4)Securities Times: According to the data released recently by the China Securities Association, only 106 of the 131 securities companies made profits in 2018, with business income of 266.287 billion yuan, down 14.47% from the previous year; net profit of 66.622 billion yuan, down 41.04% from the previous year; net income of securities underwriting and sponsorship business and net income of interest declined most significantly.