Commentary: The Financial Real Estate Sector Led The Two Cities To Go Higher And Lower.

Affected by the general market growth of the peripheral markets, the two cities opened high on Friday.

Stock index opened 24 points higher, directly on the 20 day moving average.

After the opening of the two cities, the stock index went down slightly, then pulled up, and the Shanghai stock index began to shake around the 20 day line.

Small and medium-sized plates are active, playing an important role in the stability of the index. The collective weight of the large plate has hindered the rebound of the two cities.

Two cities continued to fall in the afternoon, the index rose sharply narrowed, the two cities fell green, and the Shanghai stock index once fell through the 5 day moving average.

On the spot, the index stocks have fallen to drive the index down, and some of the good morning varieties have also announced a sharp decline. The real estate stocks once again become the main driving force behind the big market.

On the other hand, small and medium-sized stocks such as pharmaceuticals, breweries, home appliances and media have gone up strongly, and Qinghai, Jiangxi, Haixi, Sichuan and other regional plates have performed well.

Real estate, finance, iron and steel and other large plate weight led weak.

The pressure of today's market still stems from the traditional industries such as financial real estate stocks, especially the related stocks of real estate industry chain, such as real estate stocks and iron and steel stocks.

New energy, new materials and varieties with new product advantages are still favored by funds.

The recent breakup of new shares has once again reappeared in the market.

Historically, the low opening and downtrend of new shares and large breakage often mean the extreme downturn of the market.

This will lead to a gradual decline in the price earnings ratio and issuing price of new shares, and will also have a certain restraint on the issuance and listing of large cap stocks such as Agricultural Bank of China.

On the other hand, in the context of the issuance of new shares generally at very high price earnings ratio, a large number of stocks with ten times price earnings ratio in the two tier market are favored by off court funds.

Even the most recent adjustment of the largest real estate stocks, has begun to have the obvious signs of funds coming into the market.

At the close, the Shanghai stock index reported 2655.77 points, down 0.15 points, or 0.01%, and Shenzhen index reached 10495.65 points, or 47.68 points, or 0.45%.

According to market analysts, the overall dynamic PE level of Shanghai and Shenzhen 300 in 2010 is close to 13.5 times the bottom line of historical valuation according to the market consensus forecast.

Even considering the downside risks of future earnings forecasts, the dynamic PE of the Shanghai and Shenzhen 300 has been close to 15 times, based on the pessimistic situation of 15% profit growth in 2010.

Judging from this, under the support of the bottom line of valuation and the end of the policy tightening period, the market is expected to shake down in June.

It is predicted that the Shanghai Composite Index will run from 2400 to 2900 in the coming month.

{page_break}

Analysis of important news

(1) the securities and Futures Commission deters short sellers?

Liu Xinhua, vice chairman of the securities and Futures Commission, said on 27 th that guided by marketization, we should further cultivate the market oriented innovation mechanism, strengthen information disclosure supervision and market thematic risk management, vigorously strengthen the construction of the legal basis for the market, gradually establish a market credit system, perfect market constraints and price constraints, and improve the institutional mechanisms conducive to stable operation of the market.

After the Insurance Regulatory Commission launched the rescue market in a timely manner, the SFC or began to strengthen the system construction in order to "stabilize" the recent ups and downs of the A share market.

He also said that we should strengthen supervision as the starting point, promptly guard against and effectively defuse market risks, strengthen routine supervision, severely punish lawbreaking and discipline violations according to law, further deepen the supervision and understanding of new businesses such as stock index futures, margin trading and so on, and gradually grasp the inherent laws and characteristics, strengthen the monitoring and cross market supervision of stock market and futures market, and maintain the smooth operation of the market.

[Financial commenting]: in the case of the CIRC's announcement that the government's attitude has been declared, the SFC's "stability and stability" will be deterrent to opportunistic opportunists who are short of opportunity, thereby contributing to maintaining the enthusiasm of investors in the market.

(two) adjust the structure of "big stick" and "carrot"!

The working conference on eliminating backward production capacity of the national industrial system was held in Beijing today. The meeting will decompose the tasks of 2010 and eliminate backward production capacity.

Li Yizhong said that all localities should announce the backward production capacity, backward process equipment, elimination time limit and list of enterprises that need to be eliminated on the local media and the Internet. The list will be reported to the Ministry of industry before the end of July this year. The Ministry of industry and information will also make a public announcement on the mainstream media and the Internet, so as to ensure that the backward production capacity that should be eliminated this year will be shut down before the third quarter.

After the solemn commitment made by the Copenhagen climate summit, the government is beginning to play a role in lagging production.

The Ministry of industry and Commerce issued the goal and goal of eliminating backward production capacity in 18 industries such as iron and steel making, cement and other industries in 2010. It was approved by the Ministry of industry and Commerce on the basis of the relevant documents issued by the State Council before and after several rounds of communication and coordination with various parts of the country.

Li Yizhong emphasized that ironmaking is the most important and difficult task to eliminate backward production capacity in the 18 industries.

This year, we plan to eliminate backward production of 30 million tons of ironmaking. Although we can finish the "11th Five-Year" elimination task, we need to complete the goal of eliminating 400 cubic meters and below 72 million tons of production capacity before the end of 2011, which is a very arduous task.

This year, the central government has preliminarily arranged 4 billion yuan reward fund to support the elimination of backward production capacity. The role of the industrial sector has not yet been put into place in the arrangement and use of this fund.

The Ministry of industry and Commerce has negotiated with the Ministry of finance to further improve the methods of fund management so as to make the arrangement of funds closely combined with the elimination of backward production capacity and produce effective results.

[Financial commenting]: from the practice of "big stick" and "carrot", we can see that the government is eager to eliminate backward production capacity and promote structural optimization and upgrading of the domestic economy at the same time.

(three) Premier Wen rectified "economic chaos".

Premier Wen Jiabao chaired a State Council executive meeting on 26 April, deploying to strengthen local government financing platform company management and crack down on hoarding and driving up agricultural products (000061) prices and other illegal activities.

The meeting pointed out that for many years, the financing platform companies set up by local governments and their departments and institutions have raised funds for local economic and social development, and have played a positive role in strengthening infrastructure construction and coping with the impact of the international financial crisis.

But at the same time, there are also problems of excessive scale growth and inadequate operation.

In order to effectively prevent financial and financial risks and maintain sustained and healthy economic development and social stability, we must strengthen the management of financing platform companies.

The meeting also pointed out that China's agriculture has been in good harvest for six consecutive years, and the production of important agricultural products such as grain, cotton, oil, meat and sugar (000061) has been growing steadily.

Since the winter of last year, natural disasters have been frequent in China, and some agricultural products have been affected.

In recent years, a few illegal operators have made use of the characteristics of individual agricultural products, such as concentrated producing areas, strong seasonality, reduced total volume and easy preservation. They have fabricated information about distributing price increases, hoarding up prices and driving up prices, resulting in partial market imbalance in supply and demand, abnormal price fluctuations, seriously disrupting market order, and damaging the legitimate rights and interests of producers, consumers and other operators of agricultural products.

Immediate and effective measures must be taken immediately to crack down on illegal activities according to law and safeguard the normal production, circulation and price order of agricultural products.

[financial circles commenting]: Premier Wen's two important tasks of "driving and driving" will, on the one hand, highlight the importance of the government, but on the other hand, it seems to imply that the "chaos" of financing and the price of agricultural products have come to a serious extent that they have to rectify.

{page_break}

(four) the central bank releases liquidity quickly.

Due to short-term liquidity constraints, this week, the central bank sharply reduced the issuance of central bank bills, and quickly injected liquidity into the market. The net weekly investment volume will be set up since April.

The central bank issued on Thursday (May 20th) the March issue of central bank ticket yield for the first time to break the trend in the past 4 months, up 4.04 basis points to 1.4492%.

Statistics show that this week the market expires capital is 180 billion yuan, if 27 days the central bank does not carry on other operations, this week the market will throw money 145 billion yuan.

The open market will release 30 billion and 90 billion of the funds on Thursday and Friday, which is expected to help alleviate the thirst for liquidity.

Although short-term funds are tight in the market, the first day market tendering on the 26 day shows that the medium and long term funds are still ample.

We believe that this may mean that liquidity is shifting from overall easing to structural easing, while we must be alert to the continuation of financial tensions.

At the same time, it is worth noting that the launch of the new real estate policy has greatly reduced the amount of loans, and initially estimated that the loan has been less than 1/10 in the past.

The drop in demand for bank loans will help ease the pressure on government to control credit.

[Financial commenting]: since regulators have suppressed real estate, the financing of bills will increase in May, including the future bank credit, and the credit structure of banks will be improved.

In this case, because the pressure of government regulation and control of credit has decreased, we believe that credit will have a buffer space in June, and monetary policy will not use price tools in the two quarter.

(five) the pilot scheme of triple play is beginning to show "clues".

After the first two sets of programmes submitted to the three networks convergence leadership group of the State Council were rewritten, the SARFT and the Ministry of industry and commerce both made concession of the third networks, which are now basically recognized by the State Council.

According to sources, comparing the first two sets of programs, the biggest change of the new scheme is that China Telecom (market, information, commentary) has obtained some broadcasting control rights in some form.

This means that the new scheme has already made tolerance and concession to each other in the most contradictory two-way entry problems of telecommunications and broadcasting.

The twists and turns of the pilot scheme for triple play have only begun to emerge, and investors have only had the opportunity to catch a glimpse of Mount Lu's true colors.

The content broadcasting control power has opened up to telecom operators, which has made the broadcasting and TV system feel the pressure of competition and accelerated the process of controlling Internet TV.

Recently, the State Administration of radio, film and television issued a radio and television VOD business license (a).

The effective period is from April 28, 2010 to April 28, 2013 for a period of three years.

This permit allows the broadcasting network (600831) to pmit news, movies, TV shows, variety, sports, music, drama, education, science and technology, finance and economics, air and video, military and life information in two ways in the province of Shaanxi in the form of cable pmission.

This will be the first time that the local broadcasting and television enterprises have obtained the content service management license after the SARFT issued the "Internet TV content service management standard" and the "Internet TV integrated business management standard" issued in April this year.

[Financial commenting]: the initial decision of the pilot scheme of the three networks convergence has cleared up the obstacles to its rapid development, and will also vigorously promote the rapid development of the upstream and downstream industries. Moreover, the three networks convergence and the potential will be pursued with the enthusiasm of the market funds for the theme of smart grid and energy saving and emission reduction. We should follow the two clues of "terminal%2B content" and dig out the selected stocks carefully so as to achieve better returns.