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Market review: May 18, 2016

Fang submitted 2016-05-18 15:31:05

Market review:

China stocks declined about 1.27% before the Fed minutes release tonight while national team fight to save 2800 points with Fin sector soaring after 13:30 p.m. ignoring the overall down in A-share market. Of course, as we said yesterday, Fin sec is attractive from a valuation point,indeed.Recent improvement of US econ data sparked new round of speculation of Fed Rate hiking in June though we think the likelihood is low, for now.

Research Notes:

Money outflowed from Motorcycle, Highway and Cement sectors the most. Liaoning Kelong Fine Chem Co.(300405.sz) rallied to limit-up for its merge plan with one of its downstream clients.

Despite the sentiment biased to risk aversion for May, we still believed SHA could bottom, probably before the June FOMC meeting. Yet investors have to concern about the changing expectation of inflation giving the recent rally of agri commodities can run into summer and it could tight the hands of PBOC and place a major uncertainty on its monetary policy. We suggest some exposure to agri sector and underweight construction materials or short iron ore / rebar futures as a hedge.

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