Daily Report 291214 2014-12-29
Macro Economy
The US stock market remained the growth since last week, and the Nasdaq Composite Index rose by 0.7% till the highest level since March, 2000. The WTI crude oil contract delivered on February closed 2% at $54.73. Russia would use up all its sovereign funds in 3 years if the government does not readjust the budget structure, asserted by Russian finance minister. This indicated that the Russian economy did not stable along with ruble. Besides, the Japanese government permitted 3.5 trillion yen to stimulate the economy since domestic demand slip due to sales tax raise in April.
As for domestic market, the National Development and Reform Commission (NDRC) lowered the petroleum products prices from 27th December. Gasoline and diesel prices reduced by RMB 520 and 500, respectively, specifically, retail prices of 90# gasoline and 0# diesel decreased RMB 0.39 and 0.43, respectively, the lowest for the year. Domestic oil prices reduced several times associated with global price slump, but the former two cuts had been offset by sales tax raise. People’s Bank of China (PBC) announced to transfer part of inter-bank deposits to savings deposits; and this alteration should be counted into reserve, and the reserve ratio for using it is temporarily 0. This expanded loanable funds of banks, indicating PBC is less likely to lower reserve ratio. Nevertheless, whether commercial banks could take this advantage is a question.
Domestic main 1505 gold futures contracts topped down in the night session on last Friday, short-term moving average arranged laterally. Pay attention to operation opportunities break through RMB 242.5-237.5. Overall, the US economy recovery contributed to interest raise of the Fed. Gold prices will remain weak for the medium term. However, intensive circumstance in Ukraine and Monday’s Greek presidential election led the market became risk averse, and further supported gold prices. From the fund aspect, funds will keep selling pattern, that, the ETF gold cut holding positions by 0.6 tons. It is suggested that holding short positions of former RMB 242.5 contracts, stop loss at RMB 243.5, and stop earning at RMB 233.5.
Domestic main 1505 silver futures contracts topped down in the night session on last Friday, pressured at RMB 3,500 on 20-day moving average in a short term. Overall, silver prices is moving along with gold prices, and lacks rebound momentum after covering early gap, silver kept pressured at RMB 3,700. Positions of ETF silver remained sell-on-the-rally recently showed by funds, had experienced 8 lighten-ups this month. Specifically, there was 13.41 tons position reduction on last Friday, indicating funds’ bearish view for silver in afternoon session. It is suggested to remain short position for previous contracts at RMB 3,560, stop loss at RMB 3, 590. Conservative investors can focus on operation opportunities break through RMB 3,500-3,370 interval.
Stock Index
The stock index wobbled and rebounded last Friday. The released news of no reserve for Non-bank interbank deposit drove bank and other heavyweights rebounded. PBC formally announced the Circular 387. The paper suggested to adjust deposit statistical caliber; to transfer part of inter-bank deposits to savings deposits, and this alteration should be counted into reserve, and the reserve ratio for using it is temporarily 0. This would contribute to market liquidity, equal to interest cut. Thus, bank stocks and other heavyweights are likely to keep rebounding, and further stimulate index increase.
The LME market closed last weekend. SFE copper and the US copper fell again associated with oil price decline last Friday night, SFE copper closed down 1%. PBC announced that inter-bank deposit would be counted into savings deposit with no reserve to be paid. This is equal to an interest cut to some extent, expanded loanable funds, partially eased the tight liquidity. The national industrial profits dropped 4.2% compare with last year, presented a decline tendency. The profit fell 2.1% last month, indicating risks of economy recession, further support is needed. The Bank of Japan (BOJ) released 3.5 trillion to stimulate the economy. This stimulation relies on budget surplus and sales tax rather than bond issue. As a whole, recent stimulation policies are beneficial for the copper market. Basically, the LME inventory remained around 172,000 tons last week, the SFE inventory surged 12,700 to 105,000tons. From the consumption aspect, there are no improvements for downstream demand. From the supply aspect, no worries for concentrates supply, the Chinese concentrates production continuously broke the record high. Technically, the LME copper might test the effectiveness of the previous low--$6,230 support. We look forward for what happen next of this support.
The CBOT market reopened last Friday, and closed up influenced by technically buying although trading volume was light. Basically, the market was stable due to the coming New Year’s Day. Trading volume will keeps low in the following week. South American region had no change; Brazilian soybean passed into growing cycle; Argentine soybean sowing reached two thirds; accordingly, the biggest competitor of South America is Argentina. The US export demand was stable, export sales exceeded 85%, and following export might go over the expectation. Main US soybean contracts are likely to wallow among 1,000-1,050 cent. Pay attention to the demand and supply report of this month and January. The DCE closed up in the night session of last Friday, especially the soybean No.1 deferred contracts, it rebounded largely; and the increase of funds pulled up the deferred contract along with 1501 contracts position selling. This contract appeared squeeze. It is suggested to stay away from soybean No.1 contracts due to long-short conflicts. DCE soymeal closed up along with the outer disc. However, there is less rebound space for DCE soymeal in a short term, since it restricted by spot weakness. Short DCE soymeal once the price increased.
PP futures contracts kept low shock. From the upstream, the US and European crude oil futures kept falling, specifically, the WTI crude oil dipped $1.11, averaged at $54.73; Brent crude oil declined $0.79, averaged at $59.45. Propylene held the line. Currently, no apparent change on device operation rate, no signs for overall maintenance. The spot market had gone through a consolidation last week, neutral trading volume presented, investments pressured. Although Sinopec raised factory prices, the acceptance of downstream was not high, merchants acted shipments along with the market trend. Take wires as an example, the quoted price of north China was RMB 8,900-9,400, east China RMB 9,400-9,700, and south China RMB 9,500-9,800. The market basis resumed weak. From the disc, prices are lying among a narrow wobble adjustment interval. Adjustments offset rebound momentum, though MACD red pillars are getting longer slowly. Due to high likeliness of shock adjustments, it is suggested to wait temporarily.

                                                                                       Dong LV (Investment Certificate NO. TZ008452)