Daily Report 070115 2015-01-07
Macro Economy
In domestic market, rumors said that the Chinese government is going to speed up the infrastructure project that contains over RMB 70 trillion funds. However, we think even though it is true, it is an effort based on last year’s micro-stimulation to continue infrastructure construction in order to support the Economy. Moreover, economic growth of today is more significant than it of 6 years ago, the simulation effect of RMB 70 trillion for current GDP is not as powerful as previous RMB 40 trillion for 2008 or 2009. Besides, the Chinese HSBC service PMI of December released yesterday is higher than prior period, indicating Chinese economy transition.
Domestic 1506 dominant gold futures contract increased by 1.61% in the night session, broke through RMB 245 resistance and continued to rebound, and the bull moving averages ranged upward. For operation advices, hold long positions that broke through RMB 245 resistance point. We suggest to set the stop loss at RMB 244 and to set the stop profit at RMB 248. The information that the increased risk of Greece is about to exit the EU caused funds rushed to risk-aversion assets. Furthermore, the U.S. and Europe stock markets were badly wounded, the U.S. debt yield slumped while gold surged. Gold ETF cut positions of 2.99 tons after 1.79 tons position increase. Since the market is uncertain, it is suggested to hold light long positions in short periods. Besides, the increase ofUS dollar index still hammering the gold price as it is priced by this currency. Although the U.S. industrial orders of November and service PMI of December are lower than expected, US dollar index kept appreciating with the help of euro and GBP depreciation. The interest rate meeting notes is set for release at 3.00 a.m. by the Fed; gold price is expected to fall again if the Fed confirmed the optimism of the economy and interest raise expectation.
Domestic 1506 dominant silver futures contract rebounded in the night session, increased by 1.56%, and the bull moving averages ranged upward. For operation advices, hold long positions established at 60-day moving average of RMB 3,510. We sugget to set the stop loss at RMB 3,490 and to set thestop profit at RMB 3,600. Intraday we suggest to ocus on if the price could be stable at RMB 3,580. Overall, silver price follows gold’s, but it bears pressure at RMB 3,700, the weakness of midterm remains unchanged. Funds showed that silver ETF positions follow the way of sell at high since the beginning of December 2014. Overnight holding positions reduced 4.63 tons, funds’ bearish view of silver.
LME copper closed at $6,132 on Tuesday, fell $10. Saudi Arabic revealed the unwillingness of lowering output, which led to overnight crude oil drop for near 4%, and further pressured copper prices. Data from the U.S. showed some turnarounds. Durable goods orders of November dipped 0.9%, factory orders declined 0.7%. Besides, the Institute for Supply Management’s (ISM) non-manufacturing PMI of December reached the bottom of the past half year at a reading of 56.2, down from the previous 59.3. In fundamental, LME spot premium rose $9 to $76, inventory increased 300 tons to 179,000 tons. There was a big bull of 20%-29% of January contracts appeared on 2nd January. Domestic premium rebounded RMB 80 as premium of RMB 20-80. However, market supply is loose, downstream market prefers hand-to-mouth buying. International Copper Study Group (ICSG) reported in December that there would be an excess supply of 390,000 tons of global refined copper in 2015, completely toppled previous five-year’s short supply. Since China and Europe lowered their demand of copper, supply kept growing. Moreover, Chinese copper production continuously increases in a double-digit growth, indicating the release of smelting capacity. Currently, fundamental surplus is the main stress. To be noticed, the average copper price has reduced by 10% compared to 2014, adding that the State Reserves Bureau (SRB) copper buying, actual Chinese copper surplus is expected to reduce, and this may support the copper price. Technically, copper prices will keep weak with a certain adjustment in a short-term, the resistance would be at 5-day moving average of $ 6,230.
Overnight U.S. soybean remained growing affected by export demand and draught in South America. Information: 1. Argentina has few rainfalls in northwest regions, that worsen the drought anxious. 2. Folk exporters are reported to export 243,000 tons soybean of next year. 3. Informa lowered U.S. soybean production expectation to a reading of 39.69 billion bushel, just down from the 39.91 billion bushel reading previously; the expected orders are 47.6 bushel. For the status quo, although supply surplus is the bearish signal to pressure prices, the market would react significantly once good news appears, indicating limited downward space of U.S. soybean. Short-term prices would wave between 1,000 cents and 1,060 cents. Concern United States Department of Agriculture’s (USDA) demand and supply report. DCE soybean No.1 1501 contracts formally accessed delivery month. Soybean No.1 flat so far, the futures price would be set after the delivery of 1501 contracts. Soymeal spot prices increased RMB 20-40 per ton in many regions. Specifically, current spot prices in Guangdong and Guangxi are approximately RMB 3,100 per ton, Shandong and Zhejiang spot at RMB 3,150-3,200 per ton. Market expectation of arrival is 7.5 million tons in December. The arrival of January is higher than expected, as 6.9 million tons. The supply pressure is obvious. For operation advices, short sell DCE soymeal at high target 2,800, observe soybean No.1.
PP futures opened at 7,500 then fluctuated, and closed at 7,523, trading volume increased 136,000 lots to 699,000 lots, positions surged 34,836 to 3 million lots. Form the upstream, propylene flatted. From the device aspect, rate of operation is normal, no signs of scale maintenance. For the spot aspect, pp in most markets kept falling, declined RMB 50-250 per ton. Dominant petrochemical regions lowered factory prices in succession, pushed down resource cost. PP futures opened low and went lower. Accordingly, majority of merchants sold on discount, the reduced willingness of billing was obvious. Downstream manufacturers hesitated, willingness of taking over goods undermined further, trading volume is light. Dominant wires quoted prices of North China is RMB 8,700-9,100 per ton, East China quoted at RMB 9,100-9,350 per ton, South China quoted at RMB 9,150-9,300 per ton. Fundamental weakness continues. View the market as a whole, although overnight crude oil influence sustained the weakness, recent prices continuously fluctuated at 7,500 line, support on 7,500 line is obvious. Crude oil fell again last night. Thus, it is suggested to focus on the performance at 7,500 line, observe the changes.
                                                                                            Dong LV (Investment Certificate NO. TZ008452)