Daily Report 241114 2014-11-24
Stock Index

Although the People’s Bank of China is trying to avoid the decrease of interest rate, short-term economy growth still takes the upper hand. The rate cut is aimed at decreasing the financing costs of enterprises, which will lower their operating risk. It is also supposed to benefit industries like securities, real estate, electric, coal, non-ferrous metals, steel and etc. However, as the market space for the real estate industry is not that much, the effect of stimulation is likely to be limited. More policy related to rate cut is expected to be published afterwards. However, when the economy is weak, the banks are not willing to offer loans to enterprises while the enterprises themselves are reluctant to borrow funds from banks. On the whole, the rate cut is good for the stocks market in short term, but the long-term effect still needs to be seen.


Soybean

Last Friday soybean closed up which impacted by technical buying and short-covering boost; also China unexpectedly cut of interest rate boosts the market at the same time. The U.S. soybean price is waving around $10-11; current focus should be on the huge amount of supply and the demand of the market; judging from historical data, by the end of Q4 to 2015 Jan., the market volatility would be in the trend of waving up. Though this year there is a heavy pressure from the supply, the market has already consumed previous bearish thoughts due to the increasing of supply. In the future, any bullish news would support the market somehow.
For DCE soybean No.1 contract, the nearby contract price is high but the other way around for the further month contract. The spot price near the manufacturing location dropped to dropped to RMB 4400 per ton; people strongly believe that the future will be bearish market; we expected that the price of further month contract is heavily under pressure. We suggest that for DCE soybean meal occasionally short; for short position of soybean No. 1 contract occasionally stop-profit.


PP

Last Friday PP futures opened at a high price and followed with price shock. It opened at RMB 9739 and closed at RMB 9742. The trading volume dropped 3900 lots to 211000 lots; the holdings dropped 5456 lots to 154000 lots. From the upstream perspective, propylene price slumped; FOB Korea propylene dropped $30 to average price $1045.5 per ton.
For devices, the device centralized maintenance is still in progress; last week the rate of operation rebounded slightly, but it is far below the figure from last month. The centralized maintenance did not impact the market that much since the inventory level is high, which could not effectively support the market.
In terms of spots, last week petrochemical operated in sales strategy in order to lower the inventory level. The shipping price of merchant fell along with the lower ex-factory price; they also targeted at dropping the inventory level. Current raw material price is relatively flat; there is space for profit; however the new orders are limited which continues previous situation that order followed with the demand.
For instance of the wire drawing price, today's mainstream of North China bid in RMB 10000-10370 per ton, East China mainstream quotation around RMB 10200-10500 per ton, South China mainstream quotation in RMB 10400-10600 per ton. Currently, contract 1501 is strongly supported by RMB 9600; which leads to contract 1505 almost approach its low and MACD appears deviation form.
                                                                                         Dong LV (Investment Certificate NO. TZ008452)