Daily Report 031114 2014-11-03

Gold

Domestic gold plunged by 2.21% last Friday. The gold dropped down the important bolster at RMB 238 and was then bolstered at RMB 227.5. On the whole, the gold rallied slightly after a gap down opening. In terms of operations, previous short positions opened at RMB 242.5 could be held. Stop-profit for part of those short positions should be set at RMB 227.5. Investors are not recommended to open new short positions based on current situation. Defensive moves should be prepared for rallying risk after the oversell process. The performance of gold around RMB 232.5 should be focused. The gold is being sold increasingly due to the announcement that the Fed ends the bond purchasing project last Thursday and the statement which indicates the Fed is optimistic toward the U.S. economy. Last Friday, the Japanese Central Bank surprisingly expanded its already massive monetary easing program, which attracts speculators back to Japanese market. The USD depreciated significantly against the JPY to over 110. The USD index increased strongly to 87. The USD-denominated gold kept slumping for three days, moving toward RMB 1160 after dropping below RMB 1180. It is believed the funds are not holding an optimistic view toward the gold. However, positions of gold ETF remains flat for the past three days, which indicates funds are waiting for the next opportunity. Investment demand should be in focus while the physical demand is not that satisfying. China gold yields in Q3 rise by 14.27% on year-on-year basis, but the consumption demand slumps by 21.42%. On the whole, if the U.S. economy continues getting better, which will further stimulate the USD index, the gold will remain weak. The U.S. non-farm payroll of October, statement from several Fed officials and the Japanese Central Bank Meeting Minutes will be released in this week.


Silver

In domestic market last Friday, main silver contracts slumped following the trend of gold. The decrease of silver was 4.01%, which is even higher than that of gold. The silver decreased nearly RMB 250 in two days after it dropped below RMB 3700. Panic selling takes place in the market. In terms of operations, previous short positions opened at RMB 3780 could be held. Currently, the silver has already dropped below the lowest points ever since the silver comes to the market. Performance of silver at RMB 3500 should be in focus. Defensive moves should be prepared for rallying risk. After the sideways adjustment for 21 days, silver in the foreign market plunged after it dropped below the convergence region between $ 17.6 and $ 16.6. Foreign silver is strongly bolstered at $ 16. On the whole, the silver is still following the trend of gold, but the decrease of silver is higher than that of gold after the period of consolidation. The positions of silver ETF increased slightly by 29.81 tons after remaining flat for 12 days, indicating the funds are buying silver when the price is low. However, whether the funds will continue this strategy still needs to be seen.


Stock Index

Stock index keeps rising last week, hitting the record high since September, 2013. Easing monetary policy will help the economy to grow sound and steadily. Besides, the Shanghai – Hong Kong Stock Connect is expected to take place soon as well. Influenced by those positive factors, stock indexes increase strongly. However, the China Official Manufacturing PMI in October is 50.8, lower by 0.3 compared with that of last month. It is the new low in the past five months, indicating the growth momentum of economy decreases in October after it shows an upward trend in September. In October, the housing prices in 100 cities first decrease both on year-on-year basis and compared with last month. It is believed the effect of policy toward the real estate market is not as good as expected. Downward pressure of economy still exists. Further easing policy may be needed. Therefore, there may be rallying momentum for stock index in short term after the stock index dropped below 2500 basis points. However, investors should be cautious toward the mid-term and long-term trend of stock index as the economic prospect is not satisfying.


Soybean

Last week, DCE soybean price rally along with those prices in foreign market; oil meal price is getting stronger. Domestic market is relatively stable, while the spots slump even deeper; current price is around RMB 4400-4440 per ton; purchasers remain bearish; pay attention to famers’ selling schedule in the further. Soybean meal spots is quite firm; the boost in U.S. market has a strong support on spot price; domestic supply is stable. However, as more spots is going to arrive in Nov. people think in the further will more likely to be bearish. In terms of operation, we suggest dropping current long positions of DCE soybean.


PP

Last Friday PP future opened with a flat and followed with an uptrend; opened at RMB 9980 and closed at RMB 10086. From the upstream, propylene prices remained flat. For the spots, last Friday in domestic pp market, the price of some products edged up roughly about RMB 50-100 per ton. Petrochemical CPC regions such as north China, south China, central China, the ex-factory price being increased; this has further enhance to the market cost; however previously, due to the majority sources asked for high price, the increasing on last Friday was limited; the trading and investing level seems good.
For instance of the wire drawing price, today's mainstream of North China bid in RMB 10600-10700 per ton, East China mainstream quotation around RMB 10700-10800 per ton, South China mainstream quotation in RMB 10700-10800 per ton. Fundamentals are short for momentum to pull up the price. MACD exposure is upward, but upward momentum is not enough; currently the market is bullish, but current main contract (contract 1501) is going to be switched soon, the basis is great, price may hardly drop further. We suggest investors who hold short positions of contract 1501 should sell out when the price is low; for other contracts, in the short term short is not recommended.
                                                                                          Dong LV (Investment Certificate NO. TZ008452)