Citigroup believes that China will raise interest rates soon, following the decision on Saturday of exercising the ninth hike of required reserve ratio in 2007, and pending release of a series of economic data this week.

The Chinese stocks, as Citigroup analyzed, soared too high and too fast, pushing the H-stock index up by 40 percent and Red Chips index up by 42 percent in the past three months.

In addition, the development of QDII was halted in the short run, and the A share market in Chinese mainland is losing its driving force with decreasing transaction volume.

Citigroup rates stocks in consuming and infrastructure industries at overweight, based on income increases, property prices rises and Renminbi appreciation.