AIFMC Macro & Market Weekly (QFII)
Macro Review and Outlook
• Industrial Added Value grew by 5.6% in October, 0.1% lower than September’s growth rate and still in a downward trend.
• Property investment aggregate growth continued to drop to 10.2% in October, yet the monthly growth rate rose to 9.4% in from the 6.8% of September. The monthly rebound is mainly due to low base number from last year, which mostly has impacted the manufacturing sector. The manufacturing investment growth rose to 8.3% from 4.5%; infrastructure investment growth fell to 12.3% from 16.5%; real estate investment growth dropped by 2.4%.
• Societal retail sales for consumer products reported a flat performance of a 11% growth.
• M1 and M2 grew by 13.5% and 14%, respectively in October, adding 513.6 billion yuan of RMB Loan and 476.7 billion yuan of societal financing amount, yet 852.3 billion yuan lower than September.
Observation of Liquidity
• PBOC executed 20 billion yuan of open market reverse repo operations, net investing 0 yuan with previous repos due.
• Interbank interest rates stabilized. The one-month SHIBOR fell by 2 bps to 2.70% while the 7-day SHIBOR fell by 1bp to 2.28%. In terms of the exchange, the 7-day repo rate dropped by 2bps to 2.30%.
• Short-term treasury bond yields slightly recovered. The three-month treasury yield rebounded by 16 bps to 2.52%. The one-year treasury yield rose by 10 bps to 2.56% and the ten-year treasury yield stayed at 3.13%.
Weekly Review of Bond Market
• Corporate bond yields continued to rebound. Corporate bond yields rebounded in the second consecutive week. High-rated corporate bond average yield recovered by 16 bps, and low-rated corporate bond yield rose by about 26 bps. The credit spread between high-rated corporate bonds and treasury bonds expanded by 7 bps, while the credit spread between low-rate and high-rate corporate bonds expanded by 10 bps.
• Quasi-municipal bond yields rose slightly. Quasi-municipal bond yields kept the downward trend in 2015, fluctuated recently and rose in the past two weeks. High-rated quasi-municipal bond yields recovered by 16 bps, and the low-rated bond yields rose by 15 bps. The credit spread between high-rate quasi-municipal bonds and treasury bonds expanded by 7 bps, while the credit spread between low-rate and high-rate corporate bonds contracted by 1bp.
Weekly Review of A-shares
• The Shanghai Composite Index fell after another round of rally. Shanghai Composite Index closed at 3580.84 points, down by 0.26%; ChiNext Index grew by 1.83%. In terms of industries, electric equipment, chemistry and automobiles posted the highest growths, while construction, commerce & retail and national defense posted the least gains. In terms of styles, growth industries had relatively strong performances while stable industries remained relatively weak.
Most Industries at Relatively High Valuations
In terms of valuation, banking, non-bank finance and household appliances are at the bottom, while national defense, computer and ferrous metal are at valuation highs. From a historical perspective, banking and household appliances are lower than historical average, while most other industries are at historical highs. Compared to the valuation of the entire A-shares market, banking, household appliances and non-bank finance are currently at discount, while national defense, computer and media are at premium.