2014.8.18-2014.8.24

AIFMC Macro & Market Weekly (QFII)

August 25, 2014

Macro Review and Outlook

• The HSBC China manufacturing PMI preview value in August is 50.3, a three-month low. After the HSBC PMI

final value in July reached a 18-month high, the HSBC PMI preview value in August dropped to 50.3, a 1.4% fall from

the final value of 51.7 in July. The new order index and new export order index dropped by 2.0% and 1.2%, respectively,

but still above the 50 threshold, showing that the number of corporations with needs to expand is decreasing.

• Stable growth for state-owned enterprises from January to July, with a slight drop in monthly profit growth. Data

from the Ministry of Finance show that revenue from all state-owned and state-held enterprises rose by 6.2% in July, and

total profit rose by 10.4%. According to July’s monthly number, there is a slowdown in monthly revenue, a decrease in

cost and profitability. The extent of decreases in revenue and profit growths is smaller than that of decrease in cost,

indicating a slowdown in profitability improvement.

2

Source: AIFMC

Revenue and Profit for State-Owned Enterprises

from January to July HSBC PMI Preview Value in August Dropped

HSBC

PMI

Revenue

Growth

Profit

Growth

Observation of Liquidity

• The PBOC has net invested funds into the market in the second consecutive week. It net invested 11 billion yuan last

week, a little lower than last week.

• Interbank interest rate kept stable. Last week, the one-month SHIBOR stayed unchanged at 4.2%, while the one-week

SHIBOR rose by 10 basis points to 3.4%. In terms of the exchange, the 7-day repo average rate dropped by 3 basis point

to 3.50%.

• Treasury yields slightly rose. Last week, all treasury yields slightly rose. Short-term treasury yields rose with the 3-

month treasury yield up by 3 basis points to 3.55%; the one-year treasury yield rose by 7 basis points to 3.81%; and the

10-year treasury yield rose by 6 basis points to 4.26%.

3

Source: AIFMC

Treasury Yields Slightly Rose Interbank Interest Rates Kept Stable

3-Month

Rate

One-Year

Rate

10-Year

Rate

Weekly Review of Bond Market

• Corporate bond yields slightly rose. Last week, corporate bond yields slightly rose; high-rate corporate

bonds’ average yield rose by 5 basis points. The credit spread between high-rate corporate bonds and

treasury bonds kept the same as the previous week, while the credit spread between low-rate and high-rate

corporate bonds also kept the same.

• Quasi-municipal bond yield slightly rose. Quasi-municipal bond yields continuously dropped since

March with a slight rise this week. Last week, the high-rate quasi-municipal bond yield rose by 8 basis

points, and the low-rate bond yield rose by 8 basis points. The credit spread between quasi-municipal

bonds and treasury bonds kept stable from the previous week.

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Quasi-municipal Bonds Yields Slightly Rose One-year Corporate Bond Yield Slightly Rose

Corporate Bond

AAA

Corporate

Bond B

Credit Spreads (Corporate

Bond AAA-Treasury Bond) Quasi-municipal

Bond AA

Quasi-

municipal

Bond A-

Credit Spreads (Quasi-

municipal Bond AA-

Treasury Bond)

Source: AIFMC

Weekly Review of A-shares

• Last week’s index rose by a small margin. Last week, the Shanghai Composite Index closed at 2240.81,

a rise of 0.63%, as most industries rose. In terms of specific industries, only non-bank finance, banking

and automobile dropped, while media, catering & tourism and computers had the biggest gains. In terms

of styles, growth stocks had a relatively strong performance, while finance stocks had a relatively weak

performance.

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Price Changes in a Week

Price Changes in a Week - Industries

CS

Co

mp

ute

rs

CS

Elec

tric

ity

&U

tilit

ies

CS

Def

ense

&

Min

istr

y

CS

Elec

tro

nic

s

CS

Tele

com

CS

Cat

erin

g &

Tou

rism

CS

Co

mm

erce

&

Ret

ail

CS

Ph

arm

aceu

tica

ls

CS

Ferr

ou

s M

etal

CS

No

n-b

ank

Fin

ance

CS

Elec

tric

Eq

uip

men

t

CS

Mec

han

ics

CS

Ligh

t M

anu

fact

uri

ng

CS

Au

tom

ob

ile

CS

Text

ile

&A

pp

arel

CS

Ho

use

ho

ld

Ap

plia

nce

s

CS

Co

al

CS

Stee

l

CS

Foo

d

&B

ever

ages

CS

Tran

spo

rtat

ion

CS

Co

nst

ruct

ion

CS

Bas

ic C

hem

istr

y

CS

Ban

kin

g

CS

Bu

ildin

g M

ater

ials

CS

Rea

l Est

ate

CSI

30

0

SME

Ind

ex

GEM

Ind

ex

Fin

ance

(st

yle)

Cyc

le (

styl

e)

Co

nsu

mp

tio

n

(sty

le)

Gro

wth

(st

yle)

CS

Med

ia

Stab

le (

styl

e)

Source: AIFMC

CS

Pet

role

um

&

Pet

roch

emic

al

CS

Agr

icu

ltu

re,

Fore

stry

& F

ish

ing

PE Of Traditional Cyclic Industries Held At The Bottom

• In terms of industry valuation, banking, construction and coal are currently at the bottom, while defense

& ministry, computers and media are at relatively high levels. In terms of historical records, banking, real

estate, insurance, petroleum, coal, and construction & building materials are currently at the bottom,

computers are at historical high, while defense & ministry, pharmaceuticals and media dropped from their

historical high PE ratios, but are still at a relatively high level. Compared to the valuation of the entire A-

share market, banking, construction and electricity & utilities are currently at discount. Defense &

ministry, media and computers are in premium.

6

Industry PEs (dynamic)

Max. since 2011 Min. since 2011 -Latest

Source: AIFMC

For more information, please contact: James Shang, Vice President, International Business Department shanjc@xyfunds.com.cn, +86-21-20398713, +86-186-2139-1100 Beiming Zhang, QFII Sales Associate, International Business Department zhangbm@xyfunds.com.cn, +86-21-20398968, +86-136-1173-2255

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Disclaimer

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