Daily Report 041214 2014-12-04
Stock Index
The stock index widely fluctuated yesterday, the largest increase, though briefly turned to zero, was over 3%. The volume of stocks pulled back from the top, as well as bank shares. Unlikely, Growth Enterprise Index (GEI) grew during the sessions, suggesting a turnaround of the market. Even then, no fundamental changes happened in the market. This shows a continuous logic of rising index. However, the market, previously promoted by sentiments, may keep being driven. On the status quo, there are great divergences in the bear market, and risks are seems to revive. It is difficult to tell what the sentiments will end up with. Thus, it is better-off to wait and see.
LME copper flatly operated under 5-day moving average yesterday, and closed down for $40.5 to $6,377.5. On a macro point of view, overnight data proved great situation in the US market—employment and service industry went on well, and the three biggest indexes kept rising, but, unfortunately, the record high USD index intensified copper prices. The US new created private-sector employment was still higher than 200 thousand level, at 208 thousand, indicating an continuous improvement of labor market. And that, simultaneously, gave advices for Friday’s nonfarm payrolls report. Non-manufacturing ISM for November rose to 59.3, which was much higher than former data, suggesting a strong service industry in the US. Conversely, non-manufacturing ISM index was overall declined. Basically, spot LME copper premium leveled off on $58, and the inventory lowered 550 tons to 165.5 thousand tons. The domestic spot premium reduced RMB 60 to RMB 70-150. That confused the hedgers, and led to an increase of speculation attitudes in the market, while arbitragers were absorbing inventories with low prices. Thus, there were lesser downstream participants, trading restrained after rising. As for supply, the gold and copper ore classifiers of a Mongolia mine—Oyu Tolgoi caught fire. This mine started to operate in July, 2013, and planed to produce 150 thousand tons of copper concentrate. Technically, current copper prices are rearranging, and the adjusting interval would be $6,230-6,550. It is suggested to wait opportunities for short selling after the prices are settled.
The LME three-month aluminum slightly declined for 0.25%, and closed down RMB 1,973 per ton. The Federal Reserve (Fed) released its “Beige Book” report of the economic boom to announce an increase of employment, and the expansion kept for two months (October and November), the November composite PMI in the euro zone was 51.1. The State Council of China eased burden of small and medium businesses (SMB), going to promote “Sannong” finance, that is, enhancing financial services in rural areas. Real Estate Investment Trusts (REIT) of Beijing, Shanghai, Guangzhou and Shenzhen registered in Ministry of Housing and Urban-Rural Development (MOHUD). On the industry aspect, global aluminum shortages in 2014 and 2015 would be 610 thousand tons and 530 thousand tons, predicted by Australian Bureau of Resources and Energy Economics. In addition, it is expected that the global aluminum demand would grow 5-6%, said the CEO of Norsk Hydro ASA. Long positions of SHFE aluminum are not suggested.
Overnight US soybean was mixed, specifically, soybean oil was strong while soybean meal was weak. The US soybean, influenced by technical buying in the late-day, closed up. Information says: 1. Informa increased the output of Brazilian soybean for 500 thousand tons to 93,500 thousand tons, and reduced the output of Argentina for 500 thousand tons to 55,500 thousand tons. 2. Export report on today shows that the current US soybean export was 650-850 thousand tons, and, while the figure in last week was 1,485 thousand tons. The fundamental of beans is stable so far, and there are no obvious evidences for and actual long short. Concern the expression of the US soybean at 60-day moving average of $10. Eye the data changes on December’s supply and demand report released on next Wednesday. Nearby DCE soybean No.1 are under the suspicion on long squeeze. So for now, the spot price of delivery for the seller at RMB 4,600 per ton is profitable. And the increase of prices would push sellers to sell under pressure. The spot shows weakness at the status quo, and the market sentiment of bearish for the afternoon session is unchanged. DCE soybean meal behaved resilient. However, the drop of the overnight US market dragged the price down. Moreover, under the pressure of later imported soybeans, the spot might be further adjusted back. For the operation aspect, in consideration of soya oil bottomed up, it is suggested to hold short positions for DCE soybean meal, and also to hold bearish view of deferred soybean No.1.
                                                                   Dong LV (Investment Certificate NO. TZ008452)