EBS-A-Share Daily Strategy-NPC, CPPCC Sessions Preview: Extensive Diplomacy, Economic New Normal, New Life

Daily market review:On 26 Feb 2015, SSE Composite and SZSE CHINEXT rose 2.15%and 0.19% respectively. By sector, brokerage, insurance andconstruction led the growth, while healthcare and TMT stocks lagged.

    One Belt One Road concept and non-bank financial stocks, which ledthe bluechip gains previously, regained momentum. Media reportsthat green lights were on for SSE 50 Index and CSI 500 Index Futuresproducts, and 23 banks in Zhejiang were approved to cut RRR by anextra 0.5 ppt, should be important upside catalysts, in our view.

    However, the ultimate factor propping up share prices lies in marketconfidence derived from Beijing’s resolution to unswervingly promotea new round of reforms and opening up policies, in our opinion.

    As estimated, Xi’s “Four Comprehensive Tasks”– to comprehensivelybuild a moderately prosperous society, comprehensively deepenreform, comprehensively implement the rule of law, andcomprehensively strengthen Party discipline, have been published byvarious media, including Xinhua News Agency, People’s Daily as wellas local newspapers, radio and TV media throughout the country. Weexpect enthusiasm for this strategic blueprint to peak during the NPCand CPPCC sessions this year.

    The NPC and CPPCC meetings this year are of great prominence as2015 is the “key year” or inflection point for comprehensive reformdeepening (after 12th FYP and before 13th FYP). Meetings will be heldon 3 and 5 March. We believe the followings are the key focus:

    1) Opening up: One Belt One Road, FTA.

    2) Diplomacy: 2015 marks the 70th anniversary of both the victoryover fascism and of the establishment of the United Nations.

    Leaders of China and Russia will review troops mutually. XiJinping will also begin his first national affairs visit to the US oninvitation.

    3) Reform: SOE reform, investment and financing, taxation, pricing,financial reform, society, people’s livelihood, judicial reform.

    4) Environmental protection and people’s livelihood: Environmentalprotection, haze control, education, health care, retirement.

    5) Advocating rule of law comprehensively.

    6) Venture and innovation of the general public.

    7) Anti-graft.

    8) Latest development of Hong Kong, Macao and Taiwan.