Last week the Shanghai Composite increased 2.01% to close at 3558.13 points, the Shenzhen Composite gained 2.32% to close at 11557.82 points. ChiNext closed at 1816.80 points with a growth of 5.13%. The CSI 300 gained 2.24% to close at 4381.30 points. Last week China’s central bank realized a net return of CNY320 billion, indicating relatively stable liquidity of china’s financial system. In terms of foreign exchange, the continuous gain of CNY during the past week have more or less affected the import and export trade, and might further raise the funds outstanding for foreign exchange. As far as interest rates are concerned, both short- and long-term rates have slightly dropped as the overall interest rate bond curve has seen downward translation. In terms of A-share market, the risk appetite is likely to pick up with expectation for marginal improvement of liquidity. The earnings of A-share companies tend to maintain current level and low valuation and stable profitability continue to be the main rationale for stock selection. Besides, the normalization of IPO and strengthened financial regulations might negatively influence stock valuations. In this sense, we continue to recommend laggard blue chips that may catch up with the broad market and well-performing SMEs.    Last week, driven by the cement stocks the sector gained 3.4%. The recently released 2017 earnings forecasts reveal performances that exceed expectation. Underpinned by expectations for strong profitability, cement stocks rebounded. With the coming of the Spring Festival, the downside trend of spot prices is likely to reach an end. Additionally, the current inventory of cement and glass nationwide stays at a low level. That said, there is likelihood for price hike in the short term. High safety margin and rebound of spot prices make the rationale for investment opportunities in the spring. Recommended stocks are: ACC (600585.SH), WANNIANQING (000789.SZ) and KIBING (601636.SH).

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