Daily Report 280115 2015-01-28
Macro Economy
China’s National Bureau of Statistics announced, slump of profits of domestic industrial enterprises above stated scale (revenue of major activities higher than RMB 20 million) in December accelerated year-on-year, the cumulative growth narrowed. Influenced by commodity markets, the mining industry plunged by 23%, and the growth of manufacturing industry and utility slowed down. According to mining and raw material industries fell, and consumer goods manufacturing industry profits rose, growth momentum is altering from investment-driven to consumption-driven. Yet the overall slow-down indicates that the transformation velocity still has a way to go. Besides, People’s Bank of China (PBC) conducted a 28-day and a 7-day anti-repos both of RMB 30 billion yesterday, intended to provide liquidity and to lower funds’ prices. This kind of activities is predicted to continue.
Stock Index
Indexes rebounded after plunge yesterday and end up down. Financial, real estate and other heavyweights were the main force that dragged the market. News said China Everbright Bank would lower the capital allocation leverage of Umbrella Trust, which means banks are going to conduct relative measures to cope with China Insurance Regulatory Commission (CIRC) and China Security Regulatory Commission’s (CSRC) reinforce of controlling leverage funds. Yet the new rules are made for the new levers not the old ones, thus have limited affection on markets in short-term, and would further slow down the leverage speed. Most of the heavyweights can barely find chances to rebound due to lack of funds. The market is likely to rise associated with fluctuations.
LME markets fell again on Tuesday, closed down by 3.24% ($182) at $5,434. Domestic 4-month contracts dropped by 2.14% (RMB 860), closed at RMB 39,350. Insufficient global copper demand and the rising inventory pressured copper prices. The growth rate of Chinese industrial enterprises profits in 2014 released on Wednesday dipped 8.9% compared with last year, drawing worries about economic downturns. Furthermore, the U.S. durable goods orders fell by surprisingly 3.4%, far lower than expected 0.3% growth.
On the fundamentals hand, LME spot premium fell back by $10 to $38.5, inventory increased 1,375 tons to 238,000 tons, having surged by 3 times since the year began. Domestic spot premium fell back by RMB 40, quoted prices rose from RMB 60 discount to RMB 20 premium. Spot copper once wholly delivered discounted; a part of brokers absorbed sources at low; downstream was demand-oriented. The State Reserve Bureau (SRB) is intended to replenish fine copper stocks, predicted by 5 insiders, the median of their prediction is 200,000 tons in the range from 125,000 tons to 500,000 tons.
News from the supply side, the new president of Zambia asserted to remain the new mining tax though thus policy might lead to mines’ closedown. The annual copper output of Zambia is approximately 900,000 tons.
Technically, copper prices is going to reach the recent lows around $5,340 again, domestic copper is located at RMB 39,000, concern the effectiveness of supports at this status.
Overnight LME 3-month aluminum closed down by 1.22% at $1,857/ton. The U.S. annual new house selling of December is 481,000 doors, surging by 11.6% month-on-month. News from the industry said that the Japanese aluminum inventory in January rose 413,000-419,900 tons, broke the record high.
Technically, domestic SHFE aluminum is likely to remain fluctuation in a certain interval in short-term, can buy on the cheap.
Overnight U.S. soybean closed down, influenced by the cancelation of Chinese soybean orders against the U.S.. Information: 1. Exporters claimed that China had canceled 2 ships of soybean which were planned to deliver in 2014/15; 2. News from the oil world, global rape seed output in 2015/16 would bottomed the 3-year floor, the output is expected to be 65-67 million tons, the figure of 2014/15 is 68.5 million tons. Since the forecast of harvests of South America and India slumped, global soybean is likely to be lower than expected. Short-term U.S. fundamentals are flat, no big news about U.S. soybean exports. South America producing areas are relatively stable. Accordingly, short-term U.S. soybean markets would remain the weak fluctuation pattern.
DCE soybean edged up Tuesday, the short-term support of 1505 contracts is at RMB 4,400. The market has accessed in a 2-to-3-month term that lacks concerns. Pay attention to later changes of spot prices. Soymeal spot partially edged up by RMB 10-20/ton. Supply is loose, arrivals in January are likely to be lower than execrated, plus recent bearish elements, soymeal is tend to be strong. Yet the overall weakness of the market has not been dispensed.
On the operation hand, keep a few long positions of previous DCE soymeal, remain the pattern of short-on-the-rebound of soybean No.1 contracts.
Polypropylene futures have gone through shocks and correction yesterday, opened at RMB 7,240 and closed at RMB 7,225, trading volume cut 215,000 lots to 319,000 lots, positions reduced 5,128 lots to 354,000 lots. On the upstream hand, propylene prices flatted. On the device hand, the operation rate is normal, no signs of new maintenance. Domestic PP markets remains the downward trend, prices fell RMB 100-200/ton comparing with yesterday. China Petroleum Corp (CPC) corrected petrochemical futures prices in the east, south and northwest areas due to previous bloated rises, further weakened the support for sources, also further triggered bearish sentiments. Merchants shipped cut lightened up proactively, lack the confidence to the afternoon session. However, downstream manufacturers’ willingness of receiving firm orders is weak, transactions are not good overall, the transaction prices were mostly low.
Take wires as an example, quoted prices of North China markets were RMB 7,600-7,900/ton, RMB 8,100-8,300/ton in East China, and RMB 8,300-8,450/ton. Fundamentals remain unchanged. View the market as a whole, current prices are fluctuating along with previous downward trends, few speculation subjects can be found recently, and are hard to move upward or downward. We suggest investors to remain the operation that coping with weak fluctuation pattern, the fluctuation interval is RMB 7,000-7,500.
                                                                              Dong LV (Investment Certificate NO. TZ008452)