Daily Report 141014 2014-10-14
Macro economy
The RMB and Ruble currency exchange agreement was signed by the Russia and China’s Central Banks yesterday. The scale of the agreement is RMB 150 billion, including energy, technology, finance and other industries. It is believed the trading volume, especially in the energy sector, of the two countries will be promoted.
In the domestic market, data released yesterday showed the export data of China in September increased by 15.3% on a year-on-year basis, which is a record high in the past 19 months. The import data was surprisingly up by 7% while the previous expectation was merely – 2%. The trading surplus narrowed down slightly. On the whole, the foreign trade in Q3 rallied and the macro economy is likely to grow steadily.
Domestic gold remained narrowly range-bound in the night session and standing on the 20-day moving average at RMB 244.5. In terms of operations, long positions opened according to the 20-day moving average could be held. The target of gold in the short term and the stop-loss could be set at RMB 247.5 and RMB 244 respectively. Recently, the pullback of the USD index and the U.S. stocks provide opportunities for the gold and silver to rebound. Besides, the gold in the foreign market has rallying momentum after dropping close to $ 1180.
As for the funds, the positions of overnight gold ETF rose by 1.79 tons, which indicates the funds turn to be holding an optimistic view of the gold. Attentions should be paid to figure out whether or not the increase of the positions is persistent. On the whole, the pullback of those risk assets will promote the rebound trend of the gold in the short term.  
Domestic silver remained narrowly range-bound following the gold, but the rallying momentum of silver is marginally lower than that of gold. In terms of operations, long positions opened according to the 5-day moving average at RMB 3820 could be held for the short term. The stop-loss should be set at RMB 3800 and stop-profit should be set at 3900. On the whole, domestic silver is likely to revise part of the previous decrease after it dropped close to the supportive line at RMB 3710. The backwardation of silver spot and futures is likely to be reversed.
Overnight in the U.S market soybean rose by over 2%, which resulted from the delay of harvest and technical buying boost. Along with the October demand and supply report being announced, the U.S. soybeans production data is almost done. After the pressure of supply being released, market concern will be switched to demand and South America production region. In the future, market concern will focus on the demand of China import, the progress of U.S. export and also the sown area in South America and its schedule, etc. It means the bearish picture which results from the soybean supply is about to the end. As the demand level, the general picture lately is more like bullish. The U.S. soybean price is going to approach the low for this period, which has short-term shocks in between 900-950 cents.
DCE soybeans market continues to diversify; soybean meal price hits the bottom then rally. Soybean meal spot has a tight supply recently, but the import soybean in September and October have arrived and also the warmed up demand after the national holiday, all these factors support for the spot price somehow.
The fresh soybean price is falling back in Heilongjiang area, and the market is in a certain level of bearish and it is hammering the market. Since the U.S. market is waving in the bottom, the domestic market investment should remain bearish. For DCE soybean market investors should pay attention to the supportive of RMB 4400, and suggested to have long positions.
Stock index
The stock index opened lower yesterday and fluctuated during the intraday trading. In the early market, the stock index kept dropping and then rallied gradually. Weak foreign stock market brought negative impact to the domestic market. The growth rate of import and export data in September are both better than expected, which proves the micro stimulating policy is effective. Besides, the foreign demand is improved as well. Market expectations are improved due to the policy to rescue the real estate market. The rising of real estate stocks is also one of the reasons to promote the stock index.
However, the performance of other cyclical related to the real estate is relatively weak. Currently, the stock index is likely to keep the strong upward trend, but the pullback risk should be taken into account as well. Attention should be paid to the macroeconomic financial data in September and Q3, which will be released this week.
The LME 3-month aluminum rose by 0.48% on Monday, closing at $ 1945.75/ ton. The currency swap agreements between China and Russia, and China and South Korea are extended to 2017. Export and import data in September are released by the custom. The trade surplus in September was $ 31 billion. Department of housing claims that, ‘over 4.7 million households in shanty towns are going to be reconstructed in 2015.’ In terms of the aluminum industry, it is released by the custom that exports of Chinese unwrought aluminum and aluminum in September are 0.4 million. The delivery queue time of the LME Detroit Metro warehouse aluminum in September advanced to 702 days. The Chalco dropped RMB 100 per ton to RMB 14000 per ton. Long positions are recommended when the SHFE aluminum is low.  
The PP futures opened at low price and rallied yesterday. Specifically, the PP futures opened at RMB 9660 and closed at RMB 9762. The trading volume shrank by 115000 lots to 202000 lots while the positions dropped by 12634 lots to 195000 lots. In terms of the upstream, the FOB South Korea propylene decreased by $ 15 and the average price was $ 1265.5. As for the PP spot, domestic PP market remained a weak trend yesterday with price dropping from RMB 50/ ton to RMB 100/ ton.
Early this week, petroleum in the northern and northeast China slipped when the trend of the market was not clear. Therefore, the bearishness was increasing. Merchants are eager to shrink their positions by selling at a discount, which increases the backwardation. Factories in the downstream are more cautious about the real market and prefer small orders to large ones. For instance, the quotation of polypropylene wiredrawing in the northern China is from RMB 10600/ ton to RMB 10800/ ton while that in the eastern China and southern China is from RMB 10800 per ton to RMB 11000 per ton and from RMB 10700 per ton to RMB 10950 per ton respectively.
In terms of technical analysis, the closing price of PP yesterday is below the 5-day moving average and the position of 5-day, 10-day and 20-day moving average and the MACD indicate the PP is likely to remain a downward trend. Short-selling is recommended to be adopted when the price is high. Attentions should be paid to the changing of international crude oil price. Investors should be more cautious and short selling could be adopted when the price is high. The resistance price could be set at RMB 10000.
                                                                                                                  Dong LV (Investment Certificate NO. TZ008452)