Daily Report 041114 2014-11-04
Macro Economy

In domestic market, State Council Premier Li Keqiang claimed over a meeting with representatives from research institutes and companies on the economic situation yesterday that, ‘The belief that the economy is running within a reasonable range is based on the fact that economic growth can provide sufficient employment and maintain stable prices while raising incomes, improving the environment, and boosting quality and efficiency of development.’ In terms of data, the final value of HSBC Manufacturing index remains flat. Official Non-manufacturing PMI slips slightly. However, the new order index of construction rallies substantially, which raises the possibility of the rally of real estate market. It is believed the overall condition in Q4 is likely to be better than that in Q3.


Main contracts of domestic gold remain narrowly range-bound in the night session. Performance of gold around RMB 230 should be in focus. In terms of operations, previous short positions opened at RMB 242.5 could be held. Stop-profit for part of the short positions should be set at RMB 227.5. Investors are not recommended to open new short positions. Defensive moves should be prepared at RMB 230 in case of the rallying risk after the overselling. The USD index rebounds strongly due to the positive U.S. economy and easing monetary policy adopted by the European Central Bank and the Bank of Japan. The price of USD-denominated gold is facing downward pressure. The performance of gold in foreign market around $ 1160 should be in focus. If the JPY and Euro remain depreciating, the gold is not likely to reverse its weak trend. As for the funds, the positions of overnight gold ETF increase 0.01 tons, indicating the funds begin to purchase small amount of gold after the gold fell off cliff. Attention should be paid to whether or not the funds will continue increasing the gold positions and impact of the U.S. midterm election.


Main contracts of domestic silver futures remain narrowly range-bound as well. The silver is bolstered at RMB 3500 for short term. As for 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. Defensive moves should be taken at RMB 3500 to close positions and make profits. 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.

Stock Index

Yesterday, stock index showed a gap up opening and then fell back in the afternoon. The HSBC China Manufacturing PMI released yesterday was 50.4, which matches the expectation. The weak trend of economy is believed to remain, but positive news, like the easing monetary policy and the Shanghai- Hong Kong Stock Connect, are still out there. After the stock index increases for a few days, the rang-bound is likely to take place. However, there is no sign that the strong trend of stock index will reverse.


On Monday LME copper price was supported at $6680, closed at $6735, up $24. China’s manufacturing data appeared weak in October. Although recently Chinese government has published a series of polices to support the real estate market, in general the market is pessimistic about China’s economy in Q4. Recent global policy is differing; Europe and Japan start the easing policy again; China also has a steady growth; these make the market pressure being released a bit; people are waiting for the macro economy become even brighter.
Fundamentals, LME spot premium edged up to $67; inventory level decreased 500 tons to 162100 tons. Domestic spot premium continues falling back by RMB 50 to premium RMB 10-80; investing and trading level remain the same; the downstream buy in according to the demand. From the supply side, after the strike of Grasberg, Antamina copper labor sides will also negotiate; pay attention to how things going on lately. In general, copper price is waving in low section; LME price is around $6530-6835, mid-price is $6680. In domestic market the copper price on Jan. is RMB 46270-48000, mid-price is RMB 47100.


The contracts related to soybean in Dalian Commodity Exchange are weaker than that in foreign market. Domestic soybean spot is relatively weak. The purchasing price is lowered in some part of the producing region. Currently, the purchasing price in Hei Longjiang producing region is completely below RMB 4500/ ton. The purchasing party believes the soybean price will remain dropping. Soybean meal spots is quite firm. Most of companies increase the price of soybean meal by RMB 10 – RMB 20/ ton. The boost in U.S. market has a strong support on spot price. Domestic supply is stable. However, as more spots are going to arrive in November, investors think in the further will more likely to be bearish. Long positions of soybean meal in Dalian Commodity Exchange are recommended to close. As for No.1 soybean, contracts in near months are believed to be strong while contracts in far months are weak.


Yesterday pp futures opened in a high price of RMB 10074, but followed up with a downward trend and closed at RMB 9979. The trading volume dropped 198000 lots to 298000 lots. The holdings decreased 4396 lots to 160000 lots. From the upstream, propylene prices remained flat. For domestic spots, the price is relatively stable with a bit increasing; in some places, the price edged up roughly about RMB 50 per ton. Early this month Sinopec pricing was increased, which enhanced the support of sourcing cost. It also boosts merchants’ bullish sentiment; they are testing to ship while the price goes up.
Downstream factory is not happy with the increasing of price; they are still buying according to the demand; the trading volume remains. For instance of the wire drawing price, today's mainstream of North China bid in RMB 10600-10800 per ton, East China mainstream quotation around RMB 10700-10850 per ton, South China mainstream quotation in RMB 10750-10850 per ton. Yesterday, the price back to under 5-day moving average and 10000 points; but in the short term it is within the rebound interval, wait for the confirm today.
                                                                                        Dong LV (Investment Certificate NO. TZ008452)