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China Market Updates (27 April 2015 - 1 May 2015)

Published time:[05 May, 2015 11:14] From:E Fund Management (HK) Co., Limited

Weekly China Market Updates (27 April 2015 – 1 May 2015)

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Market Review

Bond market resumed the positive sentiment last week. Weak fundamentals pushed Chinabond Composite Total Return Index up by 0.43 points, or 0.26%, from 164.19 to 164.62. 10 yr treasury yield (CUTB10) dropped further from 3.445% to 3.350%, down by 9.5 bps.

Source: Bloomberg 4 May 2015


The only macro data released last week was Industrial Profits. The YoY gauge recorded -0.4% growth rate, which showed that private sectors were still performing very poor. With no signs of bottoming up, the fundamentals were still supporting bond market. As investors expected more loosening monetary policy, bond yield dropped moderately.

Source: Bloomberg 4 May 2015

Long term yield dropped averagely 5-10 bps over the week, driven by deteriorating macro economy. At the same time, loosing liquidity was driving short term yield to lower level. 1 year treasury yield dropped more than 20 bps in the week. Overall, yield curve steepened in the short end and flattened in the long end.  

Source: Bloomberg 4 May 2015

Credit event of Baoding Tianwei Group Co. has passed in last week. But as fundamentals were still gloomy, credit spread widened. Over the four trading days last week, the spread of 5Y AA over 5Y policy bank bond added 11.7 bps, from 175.61bps to 187.33 bps.

Source: Bloomberg 4 May 2015

Market Outlook


 

The 100 bps RRR cut of PBoC flagged a change from moderate loosening to loosening of monetary policy. Short term interest rate showed clearly that funding cost of bond investors was dropping in a trend. Repo rate used to be very volatile in the past two years and thus kept short term yield at a high level. With supporting monetary policy and fundamentals, we believe bond market still has space to grow, with limited downward risk.

Source: Bloomberg 4 May 2015

Key market changes


 

Source: Bloomberg 4 May 2015

Source: Bloomberg 4 May 2015

Source: Bloomberg 4 May 2015

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This document has not been reviewed by the SFC of Hong Kong. Issued by E Fund Management (Hong Kong) Co., Limited.
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