GUANGZHOU (Fund China) - In the last trading week 2007, the Shenzhen and Shanghai stock market closed high with a big exchange volume broaden nearly 50% than the previous trading week. The shanghai compsite index rose nearly 3%, the Shenzhen ingredient index was up 5.3% more or less and the Shanghai Shenzhen 300 index grew up 4.6%. The shanghai and shenzhen 300 index and the shenzhen ingredient index has broken the MAC(60) curve，and continues to expand upward while the shanghai compostie index is enslaved to the MAC(60) curve dragged by the China Petroleum weighted shares’ adjustment recently.

January usually is a joyful month, the market will often relatively better perform in this month, especially continue the uptrend rebounded at end of last year. However, as the disappointment of the stock index un-launched at the end of 2007 and the monetary market and the property market continued tighteniing. The weight shares borad like oil, petrochemical,Banking and real estate still displayed in gloom. And stock index is really difficult to gain a big victory in such a unreleased gloom. On the other hand, the small and medium market value stock market are booming significantly with a magnificence in partial market. The yield is obvious as there are so many shares Limit Up every day holding the market sentiment at a relatively high level. A multi-polar hot topics will benefit the stock indext rebound. In sum, the stock index will contiue the rebound upward in the short term but is hard to gain a hight rising performance due to the drag of weight shares borad.

The hotspot: although a big adjustment in the big blue chips, the short term trend is stil not bright. This year market hotspots have changed to the tourism, retail sales, food and beverages, transportation , the media agriculture, water and gas supply, the aerospace industry, electronic information, electrical appliances, paper and printing plates related to the Olympic which gaining a obvious upward trend. It is important to grasp the transaction opportunity in such a intensive hotspots. If lacking of the trading conditions, investors can concerned about the Olympic borad.

Bond market

Last week the central bank has increased the open market operations intensity,and will carry out open market operations at Tuesday, Thursday and Friday. The central counting interest rates rose slightly small while the short-term repurchase rate declined. The open market operations is: Tuesday issued a tender price of 1-year central counting, with a circulation of 20 billion, and ultimately, the 1-year central counting rate rises 6.5 bp(basic point) to 4.0583% than the previous issue while the central counting rates of the 28-day repurchase operantion with 51 billion and the 7-days repurchase operation with 58 billion both in the form of tender interest are 3.3% and 2.6%. The 28-day repurchase rate is nearly the same to the previous issue while the 7-day repurchase operation rate is 20 bp(basic point) lower than the last issue.

Thursday the central bank issues the tender price of three-month central counting 30 billion, with a central counting rate 3.4071 percent, unchanged from the previous week, and issues the tender interest of three-year central counting 2 billion, with a central counting rate 4.52%., rising 5 bp than the previous week.And at the same time, the central bank issues the tender interest of 28-days repurchase operation 14 billion and 7-days repurchase 63 billion with a repurchase rate in 3.29% and 2.6%.

Friday, the central bank launchs a tender interest of 28-days repurchase operation 24 billion and 7-days repurchase operation 52 billion with the repurchase rates in 3.2% and 2.6%. the 28-days repurchase rate is 10 bp lower than Tuesday while the 7-days repurchase rate keeps stable. Last week the net income is 153 billion as a central bank capital flow due 161 billion last week.

Not new shares issuing last week, the inter-bank market funds is quite abundant the first half week,but is quite tight in the second half due to commercial banks preparing capital for the near holiday and the central bank’s 76 billion repurchase operation at Friday.Overall, among the inter-bank’8 bond closed-end repurchase varieties only 1 rose and the other 7 fell with a shrinking exchange volume. The repo market turnover is 917.215 billion yuan last week, dropped 13.21% compared with the previous week.And the weighted avderage interest rate rose 0.0386% to 2.1789% compared to the prior week. Though only three trading days this week, Two new shared issued with a small amount. The inter-bank funds is expected to be abundant and the repurchase rate may grow up slightly or remain stable.

Ther are 14 bonds issued last week as followed: Policy financial bonds 2, Short-term Financing Bills 4, financial bonds 4, corporate bonds 4.

The policy finacial bonds(issued by CHINA DEVELOPMENT BANK): 5-years floating interest bond issued 31 billion with an Interest Rate Gap(interest spread) 0.61% and a nominal rate 4.75% while the 7-years fixed intetest rate bond issued 20 billion with a nominal rate 5.14%.

The short term financing bills are: the second period Peking University Founder Group Co.bond( 07 FOUNDER CP02),the second period GuangDong Rising Assets Management Co.bond(07 gdrising CP02)，the first period Anhui Jianghuai Automobile Co.bond(07 huaxi CP01) and the first period jiangsu huaxi group corporation bond 2007(07 huaxi CP01),the circulating period is one year except the 07 gdrising CP02.

The financing bonds are: the Jingzhou city Commercial Bank bond 2007,the first and second period Shanghai Pudong Development Bank bond ( 07 pufa 01 and 07 pufa 02) and the Laiwu city Commercial Bank bond.

The corporate bonds are: Hunan Xiangtou holding group corporation bond 2007(07 xiangtou), the Centergate high-tech SME combine corporation bond(07Centergate), the Tianjin TEDA investment holding corporation bond 2007 (07 TEDA) and Hunan Suntown Technology Co. bond(07 suntown).

Last week, the SSE T-Bond Index rose 0.36% compared to a previous week and closed at 110.87 with a week exchange volume 3.133 billion yuan. The exchange volume was obviously greater than the previous week. And among the inter-bank marekt, the bond yield remains stabl while a increase in the . medium and long term treasury bond demand. But few institutions bid a sale offer and the transaction still centralizes in the short term vairieties.

There are two new shares issued last week, the expected repurchase rate will move up slightly. In the cash bond, the short term yield uptrend encounters a pressure while the long term yield may fall down a little cause a demand in capital allocation. The flat yield curve will occur and continue.

Copyright Fund China 2008.

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