Daily Report 280715 2015-07-28
Macro Economy
Yesterday U.S. stock market closed down for consecutively five days, and it was the longest continuous down trend from January; before that China A-share hit the steepest one-day drop in eight years among the concerns of economy growth. From data side, U.S. June durable goods orders increased 3.4%, estimation was 3.2%; durable goods orders excluding transportation increased 0.8%, estimation was 0.5%, the both over estimation increasing orders may boost the Fed interest rate raise issue. Market takes different views on rate raise timing after Fed FOMC meeting on Wednesday, most people anticipate it will be in September but we think current U.S. is far away from inflation goal, it is high possibility to postpone the September rate raise.
In Euro side, yesterday IMF states ECB shall open the fire widely; prolong QE implement period, increase asset purchase variety when is necessary to prevent the damage to Euro zone economy from Greek problem, promote inflation to reach the ECB goal. IMF holds same opinion with partial ECB officials on the suggestion of prolonging QE period. They all regard, if inflation cannot back to the 2% goal, shall purchase more bonds. From the current situation, QE is still moving ahead to the target and is estimated to achieve in next year.
As for domestic side, Shanghai Composite hit the steepest drop in eight years and trigger the concern of China economy, the biggest A-share ETF in U.S. market dropped 9.2%. SCRC denied “national team” has withdrawn, claimed China Security Finance would increase holding in proper timing to further playing the role to stabilize market; CSRC was organizing strength to investigate the clue on malicious shorting, and would deal severely if verifying. China GOV website reprints the analysis on Li’s article about “micro-control” from International Finance that, the focus of implementing control is extending the domestic effective demand; monetary policy in second half year will more focus on precisely and effectively implement the directional and discretionary control. Current domestic stock market lacks bolster from fundamental side under the situation of unrecovered economy growth and halfway transition; besides, the prior slumping slashes confidence, and market mindset turns down sharply; it is hard to rebuild bull market only on the rescue policy, and rescue policy from decision level is for stabilizing not for rallying the market. It is predicted stock market in late period will mainly volatile and does not exclude down through prior low point, the previous bull market is hard to come back.
Monday copper price adjusted in low points. On macro side, China just brush past stock market crash in end of June to begin of July, after the short stabilize yesterday stock market tumbled again. Shanghai Composite dived in the afternoon, broke through 3900 and 3800 mark, slumped 8.48%, hit the steepest drop in eight years. For this stock tumbling, CSRC status will continue adopting active measures to stable market. Current market is under the panic of damage to newly-emerging nation from Fed interest rate raise, coupled with concerning on poor China copper consumption, the market is in pessimism without regarding the factor of copper mine yields reduction. Back to the copper market, LME spots discount $17, inventories edges down, domestic spots premium still in the highest level RMB 330-410 within the year and, import window is still opening, the tighten supply platform is existing.
Technically, copper price downward risk still exists, only LME rises over $5300 the further downward trend may be ridded of. Domestic copper price resistance is at RMB 38,500. We recommend voiding macro risks on operations.
DCE soybean downs following overseas market; domestic soybean spot is stabilized, soybean price in northeast appears slightly rally from middle of last week, mainly because high quality soybean appears a certain rally trend which releases the downturn market atmosphere; but reviving of downstream shipping is slow, inventories in merchants and enterprises are higher than last year, will limit the rally scope of spots price; in addition, overall performance of agricultural product is poor, soybean No.1 contract cannot immune from it.
Yesterday soybean meal spot in most areas drops RMB 30-50/ton, quotation in most areas is RMB 2720-2760/ton; along with U.S. soybean further falling, bearish sentiment in domestic is becoming plainly; soybean port arrival amount in August to September from market anticipation is huge, hammer on market is hard to eliminate; soybean meals will follow overseas market and back to retracement. We recommend hold slight short positions in short terms as for operation.
Yesterday PP futures opened up low and wend lower, opened at 8011 and ended at 7790; trading volume increased 112,000 lots to 471,000 lots, holding decreased 9096 to 214,000 lots. In upstream, propylene price leveled off. On spots side, yesterday domestic PP market prices tended loose in stabilize. PP futures downs to daily limitation in the morning, which hammers market investing and trading sentiment; plants in downstream have purchased previously and stay in observing, initiative receiving demand plainly decreases, small orders make bargains. On the whole, homopolymerization trading is better than copolymerization.
For instance of wires, main quoted prices of north, east and south markets are RMB 7950-8100/ton, RMB 8050-8350/ton and RMB 8250-8350/ton, respectively.
As for operation, current moving average system permutes in short, MACD green column extends as downward trend. We recommend short positions can be further holding.

                                                                  Dong LV (Investment Certificate NO. TZ008452)