Daily Report 140815 2015-08-14
Macro Economy
Yesterday US stock market ended low; investors continued focusing on economy data and progress of Fed interest rate increase. S%P 500 index closed down 2.66 point to 2083.39 point for 0.13% decrease range. Data revealed, US jobless claim in last week increased 5000 to 274,000 pieces at slightly higher the 40-year low level; July retail sales increased 0.6% on monthly basis, with growth speed revised up 0.9% in May and the core of calculating GDP – retail sales revised from down 0.1% to up 0.2% in June. In Euro side, ECB July meeting minutes showed, slow Euro zone economy revive trend was “disappointed” and CPI was all along “unusually subdued ”. Committee members indicated that, there was no sign on market risk infection cased from Greek crisis but, Chinese economy situation might brought huger adverse effect from forecasted and was ready to slight adjust QE when necessary. Overall, recent crude oil further dropping shadowed over US inflation rally trend but, revived retail data showed the income effect from oil price slipping might already reflected; US inflation especially core inflation would in upward trend in middle term but, inflation was hard to plainly raise before September Fed meeting,  probability of interest rate increase in September was low.
In domestic, yesterday yuan onshore rate raised in late market; intraday down range decreased to 0.19% at 6.3990 and for the first time higher the mid-point from last November; offshore yuan narrowly fluctuated at 6.46/6.47 in New York trading period, discount range in offshore to onshore reduced to 1%.  Yi Gang, deputy governor of PBOC, indicated that PBOC had quitted normal intervention and, PBOC was capable to effectively manage if the market excessive volatility that market was in herd behavior. In addition, since PBOC had intervened RMB exchange rate indirectly, we predicted that foreign exchange reserve or funds outstanding would decrease in August. Though PBOC enhanced RMB would not further devaluating, the market forecast on devaluation has appeared and, hammer on capital outflow in late period would be huger. Current M2 growth speed had exceeded the target; basic currency tightening from foreign drain might just hedge the extra M2 and, there was a possibility of reduce reserve requirements.  But it was hard to determine whether reserve reduction would appear in a short time, the policy uncertainty was increasing.

Stock Index
Yesterday stock index volatile edged up, most primary industries raised and theme stock was in good performance; bank stock continued weaken; real economy risk from market still exist. Current booming force was from firm rescuing attitude from nation side with sufficient rescue resource; estimation of stabilize growth policy gradually made the market formed policy based estimation; it was hard for index falling. In addition, government had declared the capacity on controlling hammer on yuan devaluation and, we also believed government and PBOC were capable of controlling the situation. Current market was not in panic temporally but there was misgiving on upward persistence. Since economy data performance was weak and, if there was problem on yuan devaluation in later period, data would tend to be bearish and hard to have huge bullish.
Market was continued weakening but, there were constantly buying momentum; yesterday late market rallied and intraday may hit high. As for operation, we recommend keep in volatile mindset; long in low and do not chase it; IF high resistance was 4200 point.
DCE soybean weak volatile in night session and grease still closed down. Soybean No.1 contract was dragged from this sluggish overseas market as well; spots were relatively stable and long momentum still existed in market; it was predicted that short term market would continue volatile out of strong pattern.
Soybean meal spots slumped RMB 50-100/ton yesterday, market was impacted from overseas marker plunged and, forward import cost shifted down; although recent yuan devaluation certain bulled the soybean, after revising the spread, local market still fluctuated by US market; we recommend observing or in bearish mindset as for operation.
Yesterday PP futures market volatile high, opened at 7910 and ended at 7911; trading volume decreased 46730 lots to 359,000 lots; holding increased 10492 lots to 228,000 lots. In upstream, FOB Korea propylene edged up $1 and average price was $826.5/ton. In spots side, yesterday entirety domestic PP market stabilized; partial regions slight high bid at RMB 50/ton. Sinopec north and south China, Petro China east China further increasing EXW, which enhanced bolster to costs from supply; partial merchants shipped in rally trend for volume. Resistance sentiment from downstream plants to price increase exacerbated; individual region price fell back after soaring and the actual market trading was mainly for meeting rigid demand.
Current main quotation of wires, north market was RMB 8100-8200/ton, east market was RMB 8350-8550/ton and south market was RMB 8350-8550/ton.
As for operation, current moving average system upward, MACD red column extended as rally trend; recent market might into fluctuation section but, the upper bond has not confirmed yet, we recommend to observing.
                                                                       Dong LV (Investment Certificate NO. TZ008452)