Daily Report 051114 2014-11-05
Macro Economy

In domestic market, it is said that China intends to set up a RMB 100-billion special fund to support the construction of domestic infrastructure for ‘One belt and one road’. Specifically, ‘one belt and one road’ means ‘Silk Road Economic Belt’ or ‘21st-century Maritime Silk Road’. Increasing investment on the construction of infrastructure will help lower the burden on economy resulting from the weak real estate market. Besides, attention should be paid to the Asia-Pacific Economic Cooperation (APEC) meeting, which will be held in Beijing this Friday.


Domestic gold remains narrowly range-bound in the night session. In short term, the downward momentum decreases. As for operations, the gold price is considered weak in middle term. Part of previous short positions opened at RMB 242.5 could be held. Defensive moves should be prepared against potential rallying risk according to the 5-day moving average at RMB 232. Performance of gold at RMB 230 during the intraday trading should be in focus. After the easing policy has been adopted by the European Central Bank and Bank of Japan, the gold slumped for three days and then remained narrowly range-bound for the last two days. The U.S. economic data is mixed. Specifically, the manufacturing data is not as good as expected, but it is rallying moderately. The private sector employment index will be released today, which is believed to be a reference for the non-farm payrolls being published on Friday. The gold is likely to remain dropping if the employment market continues improving. The positions of overnight gold ETF decreased 2.39 tons yesterday after increasing 0.01 tons the day before yesterday, indicating the funds are not holding an optimistic view of the gold. The decline in investment demand will increasingly drag down the gold.


Domestic silver remains narrowly range-bound in the night session as well. However, the silver is not as strong as gold in short term. As for operations, previous short positions opened at RMB 3780 could be held. Defensive moves should be prepared against potential rallying risk according to 5-day moving average at RMB 3540. Performance of silver in the region between RMB 3500 and RMB 3450 should be in focus during the intraday trading. The silver in the foreign market basically follows the trend of gold, but the decline of sliver is higher than that of gold. Currently, the bolster effect at $ 16 is tested. It is showed that the silver positions are increased twice by the funds in the beginning of November, which means the funds are bullish toward the silver. The positions of overnight silver ETF increased 35.77 tons.

Stock Index

Stock index fluctuated and corrected yesterday. Recently, attention of market has been drawn to the new hot spot ‘China version of the Marshall plan’. Sectors related to infrastructure investment rose due to the expectation of capacity output of China. It is believed there is more active space in short term. The weak balance of economy remains. Monetary environment is relatively easing. Besides, the Shanghai – Hong Kong Stock Connect is increasingly expected. The rang-bound of stock index is likely to take place. However, there is no sign that the strong trend of stock index will reverse.


On Tuesday LME copper price has a dramatic slump, closed down by $87. Domestic spot premium slightly increased by RMB 10 to premium RMB 20-80. The spot premium hit resistance; middlemen mostly just wait and see. Downstream remains rigid demand rarely gets into the market; the market is thin in general. From the supply side, the negotiation among Antamina copper labors did not end up pretty; therefore they are planning to have an indefinite strike. This mine can produce 30000 tons copper concentrate per month; add up with low grade production, the output dropped 14% compared with last year. Technically, copper price has a dramatic slump which may go even further lately. LME copper price support level is $6530 and the resistance level is $6835.


In domestic market, contracts related to soybean in Dalian Commodity Exchange slips for the second day. Panic resulting from bird flu leads to the slump of soybean meal. Rapeseed meal dropped to limits first, resulting in the decrease of contracts related to soybean in Dalian Commodity Exchange. Domestic soybean spot is relatively weak. Investors are holding bearish sentiment toward the market due to the upcoming selling of soybean. Influenced by the decrease of U.S. soybean and the imported soybean in November, soybean meal spot in many regions dropped. Besides, the bird flu caused market panic yesterday, which further dragged down the soybean. In terms of operations, long positions of soybean meal in Dalian Commodity Exchange should be closed. As for the 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 low price of RMB 9900 followed up with a downward trend, closed at RMB 9837. The trading volume increased 72548 lots to 371000. The holdings increased 1754 lots to 162000. From the device perspective, the rate of operation edged up a bit, but still below the level in October. For the spots, among the majority markets pp price has a narrow adjustment yesterday; in some places, the price edged up roughly about RMB 50 per ton.
Part of the petrochemical enterprise ex-factory price was increase, to some extent it supports the market cost more; PP futures opened low then followed with a low trend, which lead to certain pressure to the market mentality. Most businesses are active in shipments, watch the market reaction; some businesses who wants to increase their shipments, slightly on sale. Downstream manufacturer is cautious, compared with earlier situation the willingness of pick up are distinctively decreased.
For instance of the wire drawing price, today's mainstream of North China bid in RMB 10500-10700 per ton, East China mainstream quotation around RMB 10650-10800 per ton, South China mainstream quotation in RMB 10700-10850 per ton. Judging from the fundamentals, it is relatively weak. Current price is under 10-day moving average; MACD red part is shrinking, which suggest it does not have enough momentum to rally. Since contract 1501 is nearby being switched and the basis is great, which is even greater than contract 1505; it has limited slump room. If the crude oil is not going to have dramatic rally, and petrochemical does not take any actions to protect the price, then within a short period contract 1505 will have narrow bearish fluctuation.
                                                                                        Dong LV (Investment Certificate NO. TZ008452)