Daily Report 071114 2014-11-07
Macro Economy

In domestic market, President Xi Jinping hosted the meeting of central financial work leading group on November 4. During the meeting, President Xi Jinping requires to promote the construction of ‘one belt and one road’, set up the Investment Bank of Asian Infrastructure and the funds of Silk Road. Outbound investment will help stabilize the economy, especially when domestic economy is weak. Besides, it is confirmed by the People’s Bank of China that total amount of the medium-term lending facility (MLF) in September and October released by commercial banks, joint stock commercial banks, large city commercial banks and rural commercial banks is RMB 769.5 billion. Specifically, the amount of MLF released in September is RMB 500 billion while the amount released in October is 269.5 billion. The adoption of new monetary policy shows the conflicts between stabilization and restructuring of economy. It is expected that the People’s Bank of China is likely to continue adopting innovative monetary policy to achieve the goal of directional easing.


Domestic gold remains narrowly range-bound at RMB 224 in the night session. In terms of operations, the weak trend of gold is believed to remain. Part of previous short positions opened at RMB 242.5 could be held. Defensive moves should be prepared according to 5-day moving average at RMB 226.8. Performance of gold around RMB 224 during the intraday trading should be in focus. Recently, there are quite a few negative factors for gold and silver. The U.S. stocks grow strongly due to the victory of the Republican in the Fed mid-term election. Besides, U.S. employment data recently is excellent, which promotes the market and inspires investors. The gold is then facing pressure and corrects. Attention should be paid to the non-farm payrolls being released tonight. The expected unemployment rate is 5.9% and the non-farm payrolls are 234 thousand. The U.S. stock index is highly likely to rise substantially. The weak trend of USD-denominated gold remains. The positions of overnight gold ETF dropped by 2.99 tons and they have been decreasing for the past three days. Recently, both panic selling of gold by funds and weak demand of the China’s market on gold spot lead to the weak trend of gold afterwards.


Domestic silver keeps narrowly range-bound at RMB 3300 in the night session. In terms of operations, the weak trend of silver remains in the medium term. Previous short positions opened at RMB 3780 are recommended to hold. Defensive moves should be prepared according to 5-day moving average at RMB 3368. Performance of silver around RMB 3300 should be in focus. The silver in the foreign market basically follows the trend of gold, but the decline of sliver is higher than that of gold. After dropping below the bolster at $ 16 in the short term, the silver is expected to remain weak trend. Performance of silver around $ 15 should be focused. Recently, the supply of domestic silver spot is relatively sufficient. The spread between main futures contract AG 1412 and silver spot is back to premium at RMB 27.

Stock Index

Stock index slipped slightly and then rallied yesterday. After the previous increase, the stock index is likely to remain stable in the short term. However, the rebound during the intraday trading indicates the market is still relatively strong. The ‘China version of the Marshall plan’ is mixed. The steel and other sectors dropped. However, the government aims to set up the Silk Road funds and promote the construction of ‘one road and one belt’. Therefore, other sectors are likely to rally afterwards. Considering the policy expectation and the bolster of recent hot spot, the stock index may continue fluctuating and the risk of dropping is relatively limited.


The LME copper remains narrowly range-bound on Thursday, closing higher by $ 14. The appreciation of the USD is negative for copper. The LME spot premium advanced $ 8 to $ 74. The inventory remains around 160 thousand tons. The trading volume of domestic copper spot is limited. According to related data, the supply of copper ore is still sufficient next year. On the whole, the copper is likely to continue dropping. Based on technical analysis, the copper fluctuates in the region between $ 6530 and $ 6830. Previous short positions could be held for long-term investors. Short-term investors are recommended to wait for opportunities after the copper rallies. China’s macro economic data being released next Thursday should be in focus.


The LME 3-month aluminum rises by 0.64% on Thursday, closing at $ 2072.25 / ton. The Shanghai aluminum rallies slightly and the trend is likely to remain.


In domestic market, the No.1 soybean in Dalian Commodity Exchange slumped yesterday. The A 1505 contracts drop actively due to the increase of positions by funds, which matches our previous expectation that the contracts in far months is relatively weak. Domestic soybean spot is believed to be weak. Therefore, contracts in far months are facing pressure from the funds. Soybean spot in most of regions are stable. Considering the decrease of U.S. soybean and the imported soybean in November, the pressure on supply is relatively heavy. In terms of operations, short-term short positions for soybean meal in Dalian Commodity Exchange are recommended. As for the No.1 soybean, contracts in near months are believed to be strong while contracts in far months are weak.
                                                                                      Dong LV (Investment Certificate NO. TZ008452)