Market Summary:

Last week, there was generally increase over the market. SSE Composite Index (000001.SH) changed 2.45 % to 2682.39. Specifically, small cap shares perform much better than large cap shares and we can observe that CSI500 did better than SSE50 (4.85% vs 0.71%).

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 drop for all spreads are observed. As for the spread between Shibor Rates and Treasury bonds yield, short-term (1M) spread experienced some drop. 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 0.61% (up to 16:30 of last Friday) and CNH/USD changed 0.20%.

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 26.37 billion CNY and the cumulative net inflow was 734.34 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 obvious divergent performance different from the previous week that small cap shares perform better. Foreign fund flow via stock connects kept reaching new high. the market is currently confident about the trend after spring festival.

News:

(1). Sina: Liu Shijin, vice chairman of the China Development Research Foundation, predicted at the annual meeting of the China Economic Forum of 50 people in 2019 that the economic growth rate would remain above 6% in the next two years and drop to between 5% and 6% or about 5% after 2020. There are five sources of China's new economic growth, including the improvement of inefficient sectors, the income growth of the low-income class, the upgrading of consumption structure and industrial structure, frontier innovation and green development.

(2). Xinhua News Agency: Economists generally believe that if the United States allowed its debt size and budget deficit to develop wantonly, it would be a hidden danger to the economic prospects of the United States; the increase in the budget deficit of the United States federal government, the economic stimulus plan of the Federal Reserve of the United States, and the government's tax reduction policy are the main factors leading to the rapid growth of public debt in the United States.

(3). China Securities Net: Lu Lei, Deputy Director of SAFE: It is a false proposition whether to maintain reserves or exchange rates. The frontier nature of the foreign exchange market determines the first nature of reserves. Foreign exchange reserves have counter-cyclical cushioning effect on systemic risk, and then the credibility of exchange rate stability and local currency liquidity can be achieved.

(4). 21st Century Economic Report: The Shanghai Stock Exchange held a symposium on the establishment of scientific innovation board and the pilot registration system business rules, with 33 sponsors participating in the symposium. Submitted to all persons said that supporting rules have been formulated, such as auditing standards, compliance auditing questions and answers, listing sponsorship, auditing procedures guidelines, acceptance procedures guidelines, and so on. Guidelines may still be issued in March.

(5). Shanghai Securities Journal: The consultation on the supporting rules of Shanghai Stock Exchange's Scientific Innovation Board Series, which has attracted much attention from all walks of life, will be completed on February 20. Industry insiders said that the formulation of these supporting rules shows that the scientific innovation board will soon enter the operational stage.

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