CICC UPDATE - Speculation of Merger Activities in the Real Estate Industry in China

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CHINA’S A-SHARES: ended mixed by market close, after the shcomp closed above its 200-day moving average for the first time in a year yesterday. The market sentiment was largely lifted by speculation of merger activities in the real estate industry and central bank stimulus will increase. However, Banks led the index lower after accumulated huge gains in the past few trading days, while on the other hand small caps were relatively resilient after the regulator signals a long-delayed exchange link will start in 2016. Given China’s economy isn’t going to pick up soon and traditional sectors are in the doldrums, further consolidation may last for the short term, and those sectors with solid earnings are likely to outperform.