Daily Report 160315 2015-03-16
Macro Economy
Chinese economy has stepped into a new normal, and would operate in a reasonable range, said Premier Li Keqiang declared at the press conference hosted in Beijing on Sunday, if the running speed slows down and affects employment income, then it is in the lower limit of the range, and the government would enhance directional regulation since there are enough policy instrument can be used. Simultaneously, he highlighted, China had not exported deflation to the world, but “being deflated”, implied that the continuous international commodity price slide was a great trigger of domestic deflation risks. Besides, Premier Li disserted “demand is rigid” in terms of real estate, later relative policies might loosen further to maintain a long-term development.
Domestic AU1506 declined and then rose during the night session last Friday, picked up a direction at 5-day moving average of 237.5 yuan in the short-term. Continue to take short positions according to current tendency, yet the short-term depreciation momentum lowered, indicating short positions are taking profit gradually, which means gold prices might rebound and correct in a small scope.
Strong U.S. dollar continuously pressured gold prices as a whole. Although the U.S. March consumer confidence index and Feb. PPI failed the expectations, the market gave little response. Wait for the Fed’s expression towards interest raise in the incoming rate-setting meeting this week. Gold prices would keep looking for the bottom provided that the Fed changes its “patience” of interest raise.
On the funds front, Gold ETF positions have cut 20.58 tons since 1st March, cut down 0.28 tons last Saturday, showing the decreasing interests of funds funding gold.
Domestic AG1506 narrowly corrected during the night session last Friday, came up with a direction at 5-day moving average of 3,440 yuan in the short-term.
Overall, silver prices move along with gold prices. Take short positions according to current tendency, but rebound repair might appear in the short-term.
Defense at 5-day moving average of 3,440 yuan for short positions established previously at 3,800 yuan.
Stock Index
Premier Li Keqiang denied the possibility of occurring systematical financial risks on Sunday, said that if Chinese economy glide out of or near to the lower limit, there were plenty of back-up policies; moreover, the government desires to develop a multilevel capital market. Such speech is a bullish news for bank shares, combine those gained brokerage licenses last week, 1 trillion yuan local government debt has been replaced, thus, financial stocks are relatively strong temporarily. Furthermore, streamline administration, power decentralization, and innovation encouragement inspired the market in a certain extent. Taken together, long positions are more active in the short term, yet have pressures from previous highs. The overall pattern is still significantly volatile.
Domestic copper markets range-bound last week, and the u.s. exchange rate surge tested the market again. Unlike other countries, in the U.S., deferent on economic growth and policy taking, U.S. index bull market remains, which would tremendously pressure the commodity market as a whole. Policy-setting meeting is going to be taken on Tuesday and Wednesday, and the market expects the Fed to erase their “patience”.
The copper market, comparing to other varieties, is relatively strong, and the reason include the optimism towards Chinese policy and consumption. If Chinese economy glide out of or near to the lower limit, there were plenty of back-up policies, said Premier Li Keqiang; interest cut is projected to be taken in March. Besides, domestic consumption restart was slow since 15th lunar January, quite similar to last year, the consumption regain is estimated to turn up in late March.
Another problem is about copper supply. Latest news, First Quantum Minerals (430,000 tons of annual output) will cut 50 percent expenditure (or $1.2 billion) this year, to $1.4. This is probably due to the raise of Zambian mining tax and the low copper prices. Before that, miners represented by Codelco have undermined their expense already. Those imply current supply shortage.
Three global giant exchanges raised their inventories by 31,500 tons to 600,000 tons. Whereas, the copper market has reflected that already. Overall, current U.S. dollar exchange rate pressure exists, copper prices would keep being tested, and vibrations are inevitable.
Operation strategy: hold long positions and wait for the brightness.
LME 3-month aluminum surged by 0.8 percent and closed at $1,771 /ton last Friday. U.S. Feb. PPI dipped by 0.5 percent month-on-month. Russia’s central bank interest rate fell from 15 percent to 14 percent. The Two Sessions came to a close, Premier Li Keqiang showed confidence to Chinese economy in front of journalists, declaring to lock the growth and to adjust structural balance, to make sure the economy running in a reasonable interval.
SHFE aluminum stabilized at 13,000 yuan, remaining the reverse pattern.
U.S. soybean futures closed down last Friday, affected by the accelerated Brazil soybean harvest and strong U.S. dollar. The overall performance of U.S. soybean last week was weak. The USDA published March supply and demand report at the beginning of the week, and the unexpected increased data pressured the market. Brazilian production area is bearish still, the accelerated harvest and undermined U.S. export demand pressured the U.S. soybean rebound in the short-term. Pay attention to the U.S. sown area report at the month-end. Short-term U.S. soybean would remain at range-bound among $960-1,000.
On the domestic front, last week, fodder market surged leaded by rapeseed meal; aquaculture demand revered gradually; domestic rapeseed squeezing was in the red; import rapeseed reduce and so forth. Those inspired meals, although the market seems radical in supply and demand. Soymeal went strong led by rapeseed meal, and the spot performed firm, quoted prices in coastal area were 3,000-3,050 yuan/ton, oil factories rebounded after the vacation, and market supply went up as well, soymeal fundamentals was relatively flat. Soymeal would be strong above 2,800 yuan, take cautious consideration if take short positions. Soybean No.1 futures was weak, seemed panic, and was deviated from the spot. Spot prices fell 40-60 yuan/ton, and the main purchasing prices were 4,100-4,240 yuan/ton. Since the selling process has gone through for only 35 percent, later spot might fall due to centralized selling.
PP futures dropped and then rose last week. On the upstream hand, FOB Korea Propylene fell, and averaged at $990.5/ton. On the device hand, Maoming Petrochemical Company conducted maintenance, thus the operation rate declined, is 85 percent. On the spot hand, crude oil prices closed low continuously, supplies of wires and other general materials were sufficient, but the operation rate and demand in the downstream were not good, thus it is stressful on the shipment. Petrochemical enterprises lowered ex-factory prices, the support from raw material cost lowered, and dealers also lowered the prices. Prices fell to the breakthrough point closing to the weekend, most merchants took wait and see attitude. Fortunately, the futures rebound injected some bullish news into the market, trading volume was better than the week-beginning.
Take wires as an example, quoted prices at north markets was 8,300-8,700 yuan/ton last week, and 7,950-8,200 yuan/ton this week; 8,500-8,700 yuan/ton in east markets last week, and 8,300-8,450 yuan/ton this week; 8,700-8,800 yuan/ton in south markets last week, and 8,350-8,450 yuan/ton this week.
View the market, the futures connected up the weakness and declined at the week-beginning. Moreover, dragged by crude oil, the tendency is highly likely to remain fluctuating recently.
                                                                               Dong LV (Investment Certificate NO. TZ008452)