Daily Report 091014 2014-10-09
Macro Economy
In domestic market, Premier of the State Council Li Keqiang hosted the meeting of heads of departments of the State Council and pointed out that the growth rate of China’s economy is within a reasonable region. The effect of reform is being released and new growth energy is generating. However, there is still high downward pressure on global and domestic economy. Directional adjustment will be used to support the real economy and make financing cheaper and easier. Previously released economic data of September indicates signs of rallying of the China’s economy. The investment project catalogue which has been approved by the government is revised in this meeting. Further reform is likely to take place to make the economy grow steadily. 
The domestic gold dropped in the beginning and then rebounded during the night session. The performance of 10-day moving average at RMB 242.5 should be focused recently. In terms of operations, previous short positions opened at high price levels could be held. Those short-term short positions opened before holiday is recommended to be closed. Defensive moves should be prepared around RMB 242.5. The rebound momentum seems slightly insufficient and the weak trend remains. The Fed’s meeting minutes demonstrate that the U.S. economy has been influenced by the strong USD. Besides, the inflation slows down due to the decrease of crude oil price. The Fed is not eager to raise the interest rate. Although many Fed officials expect the first rate hike will take place in the middle of 2015, the statement that easing policy will last for a relatively long time remains. As for the assets price, the USD index kept dropping for three days. The inflection point may appear in this week after a 12-week strong rebound. If the USD adjusts in the short term, the gold may have the opportunity to rally. Besides, the performance of export-oriented enterprises is influenced by the strong USD, which results in the wide adjustment of the U.S. stocks. On the whole, the meeting minutes this time remains its previous style and does not release too much information. The initial claims for unemployment benefits of last week should be concentrated on today. In terms of funds, the gold ETF positions shrank by 5.39 tons due to the gold rebounded to $ 1220 in the foreign market, which indicates the funds are not holding an optimistic view of the gold. The decrease of gold positions by funds should be focused on. 
The silver followed the trend of gold in the night market. The pattern of correction remains. In terms of operations, previous short positions opened at high price levels could be held. The performance of the silver within RMB 3850 to RMB 3760 should be focused on for short-term investors. The rebound momentum seems slightly insufficient and the weak trend remains. On the whole, the silver shows weak metal character compared with the gold, but the trend of silver fluctuates in accordance with the gold. Domestic spot silver continues to be in backwardation, with the basis narrowing down. Considering the short in domestic spot silver, the backwardation is hardly likely to be improved. 
LME copper closed down $59 on Wednesday, but it opened high by $30 on Thursday. The Fed worries that the U.S. economy may be impacted by the global economic slowdown and the strong dollar; there are dramatic differences among opinions of the interest rate adjustment; the market thinks that Fed would remain low interest rate in a long term, which boost the stock market and also leads to copper opens in a high price on Thursday, according to the Fed meeting minutes. Beside the United States, China is the other main factor which influenced the whole market. Promoting Chinese economy interval adjustable structure reform is still a premier issue, reiterated China's central government store do not turn to local debt, and the central bank to relax before effect on the regulation of mortgage lending is still caution. The macro environment is not conducive to the copper market.
Fundamentally, LME spot premiums raised $9 to $49, inventory fell 425 tons to 149600 tons. After holiday, domestic spot premium rallied slightly, but trade price is barely at high; the new import copper fulfilled the inventory, which means the supply is abundant; but downstream still does not appear to buy in. Recently the supply is the key, along with Indonesia backs to produce, the branches of CODELCO and Chalco start to produce, smelting copper concentrate processing fee soar, China and Europe smelting plants increase their processing fee for next year, which means that the global copper production capacity will be greatly released, copper supply complete remission for future on copper fill fell sharply. From a technical point of view, the short-term copper would fluctuate at over $6600 price, we suggest that copper prices will eventually try and break the $6000, resistance at $6730/80.
On Wednesday, LME 3-month Aluminum fluctuated, which closed at $1944.75/tons, up to 0.17%. The Fed released their meeting minute which is in line with expectations. The German central bank governor is against the ECB bond buying. Domestically, the reform of budget management system, to standard local government debt and to establish assessment and accountability mechanism etc, was promulgated by the state council.
Recently, aluminum oxide prices continue to rise. The import aluminum oxide trade price is around $350/ton to $360/ton; Lianyungang import aluminum oxide trade price is around RMB 2800/ton to RMB 2900/ton, which increased RMB 200/ton compared with last week. Investors could buy on dips of Shanghai aluminum, but make sure you hold reasonable amount of positions.
Yesterday PP futures opened in a low price followed with a low trend lately. It opened at RMB 10200 then fluctuated to fall, closed at RMB 10018. Trading volume increased 89744 lots to 227000 lots; holdings increased 10714 lots to 191000 lots. Upstream side, the propylene price is stable. For spots, yesterday PP market was stabilized; price volatility is from RMB30 to 50 per ton. After holiday, there is limited information pop up to lead the market. Mostly, merchants continue to have the same offer as before holiday. They choose to sell out or just cut holdings according to their own supply of shipment.
Early poor performance makes the market worries even more. Downstream buy in according to the demand, which appears thin market overall. Like wire drawing, today's mainstream of north China bid in RMB 10750-11000 per ton, east China mainstream quotation in RMB 11000-11300 per ton, south China mainstream quotation in RMB 11000-11150 per ton. Overall, today's prices have a sharp fall, the MACD green column to spread again; the current prices are above 10000 integer bit.  Fundamentals remain weak in the mid-term; investors who use to time the market can still be considered shorting now.
Dong LV (Investment Certificate NO. TZ008452)