Daily Report 261214 2014-12-26
Macro Economy
The US and European main exchanges, and majority of Asian countries’ financial market were closed yesterday since Christmas. Iraq, the second biggest oil production country of the OPEC, explained that the OPEC needed to get involved into the market in case the oil price decline further, and the reasonable price should lied between $70 and 80. The budget for 2015 of Saudi Arab implied that the oil price would rebound to $80. That might push the price up as soon as the market is open. For the Europe aspect, Russian finance minister announced that ruble crisis had been relieved, which led to the US dollar depreciated against Russian ruble by 3%, but the exchange rate is stable that staying around 52 for a couple of days.
For the domestic market, RMB appreciated by 0.3% against US dollar yesterday—the biggest rise among the recent 7 and half months. It is reported that People’s Bank of China (PBC), finished the work of adjusting statistic caliber for financial institutions’ savings and loans, would not require for higher reserves temporarily. There would be a lower expectation for reserve rate cut provided that this is true. The Executive Meeting of the State Council has passed the new electric system reformation project, and would not laterally split electronic network enterprises; but the project defined clear attributes of services, turned the low profits situation of electronic network. Besides, Hong Kong, Australia, New Zealand, the UK, France, Germany and majority of European countries will close their markets today; while the US, Singapore and Korea will resume trading.
Stock Index
The stock index rebounded largely yesterday. It is announced that interbank deposits did not require reserves, this news contributed bank stocks substantially rebounded, and further initiated the index increase. However, fewer changes happened on spot trading volume, indicating limited rally power. In addition, some local securities regulatory bureau called off new umbrella liability Insurance orally, caused adverse impacts on stock market funds. Currently, the index is volatile, and the market trend is vague, so that the index is difficult to strongly bounce back in a short time.
The LME was closed on Thursday—Christmas. SFE copper cathode shocked in the night session, specifically, March contracts fell by RMB 120 of RMB 45,510. The overnight market flatted. The market was largely influenced by oil prices recently. The demand of China was unoptimistic; methods for stabling increasing pace were majored on infrastructure. Strong US market enhanced interest raise expectation. Moreover, initiating measures of Europe and Japan supported copper prices. Overall, the macro economy is being influenced by policies; global economies are unevenly recovering, and countries other than the US lack apparent increasing point. Basically, there are no LME spot quoted price, domestic spot discount expanded by RMB 40 of RMB 180-80, holders sold at high. Spot copper discount expanded for a while, some arbitragers assimilated low-price sources especially par copper. Downstream investors excepted monthly sources only, lacked participation, and majority of transactions were made through brokers. As for supply perspective, Antamina finished strike, and there is no interference of copper concentrates supply. Chinese copper concentrates production broke historical records for 5 months in a row, while the consumption had stepped into slack season, and the decreasing growth of fixed investment means it is unlikely to rebound in a short time. Technically, copper prices may vary at low points. The resistance of 3-month copper contracts is seen around RMB 46,000.
The LME closed on Thursday. Russian ruble crisis is likely to end up. “One Belt and One Road” project is going to be announced. Audit department will enhance follow-up auditing extent for the central government’s policy implementation. Xianjun Wen, vice chairman of the Color Association, asserted that it would spend 2 to 3 years to defuse excess productive capacity. It is suggested to trade SFE aluminum contracts.
Overnight US soybean market closed due to Christmas, the CBOT soybean market will resume floor trading tonight at Beijing time; light trading volume will last during Christmas and New Year holidays, and be less volatile. The US export demand flatted, the market lacked substantial benefits. It is predicted that main contracts of US soybean would wave between 1,000 and 1,050 us cent, pay attention to supply and demand reports of late in this month and January. DCE soybean No.1 contracts raised positions and increased; funds raised the far month contracts, that is, in favor of position decrease of 1501 contracts; and this contract appeared to squeeze so far. Soybean purchasing will come to a conclusion after the delivery. The spot are facing centralized selling, forward prices have callback spaces. DCE soymeal kept weakly shocking, spot kept stable. The main reason for the market fell was intensive domestic supply. Currently, spot prices in coastal area fell to RMB 3,180-3,220 per ton, and the market estimation for the import of this month and next month is above 14.5 million tons. There is a certain extent of callback motivation for the market in a short term. For trading operation, DCE soymeal can be short mainly, and hold short positions for far month contracts of soybean No.1.
PP futures opened low and shocked yesterday. It opened at 7,808 and closed at 7,806; the trading volume dropped by 143,000 hands of 344,000 hands, and positions rose 4,766 hands to 261,000 hands. For the upstream, western markets closed during Christmas, and had no quoted prices. For device aspect, the rate of operation kept normal, no signs of scale maintenance. For spot aspect, the pp price of most markets shocked and had been adjusted. Overnight oil prices slumped, adding that flat trading volume, investors lacked interests on trading. Producer prices of Sinopec for South China, east China, and of PetroChina for northeast China raised further. Thus, merchants expanded their influence due to cost support; prices changed with production. Main quoted prices of north China market lied between RMB 8,900 and RMB 9,400 per ton, for east China market was RMB 9,400-9,700 per ton, for south China market was RMB 9,500-9,800 per ton. View from the market as a whole, prices are going through early shocking interval. Besides, western markets closed yesterday, no crude oil trading. Therefore, the market lacks information support for further discuss. It is predicted that polypropylene would keep the weakly shocking trend this week. It is suggested to wait.
                                                                                     Dong LV (Investment Certificate NO. TZ008452)