Daily Report 190815 2015-08-19
Macro Economy
Yesterday US stock market ended low; commodities downward trend was stronger than bullish side from US housing data; S&P 500 index decreased 5.52 point to 2096.92 point, range at 0.26%. From data side, July US housing starts increased 0.2%, annualized rates was 121,000 pieces and created a eight-year high, further indicated that fluctuation from prior real estate industry data might be the noise; fly in the ointment was planning permission for measuring future construction activities had decreased, yet long term growth was still moderate . In European side, there was foreign media reported, according to the demand from Greece, ECB had cut down the ELA to Greek banking industry, new amount decreased to €89.7billion. In addition, European Commission stated ceiling of Greek bailout project scale was €86.0billion and might be even less in practical. We regarded that ELA amount decreased was an optimistic signal, which meant operation condition of Greek banking system was tending toward stability, gradually rebuilding cash reserve, liquidity enhancing; the worst moment of Greek crisis was already in the past.
In domestic, China July real estate market further strengthening, new house and resold apartment in major cities continued last month raising momentum. New housing price index of 70 big and medium-sized cities increased 0.2% compared with previous period and flatted with last month; decreased range narrowed to 4.4% on year to year base, among which major cities increased range was 6.9%, second-tier and third-tier cities continued dropping. PBOC processed a RMB 120 billion 7-day-cycle reverse repo in the open market, bidding interest rate maintain at 2.5%. Operating quantity increased 1.4 times compared with last Tuesday and created a single day high from Jan 2014. Overall, real estate market was on track of reviving, but there was a sign of marginal increase slowing down; in the long term, condition was still in the stage of decreasing capacity and inventory, shall not over optimistic. After the huge amount of PBOC reserve repo, liquidity supplemented in a short time and, we recommended estimating the possibility of decreasing reserve by observing capital outflow and variation of M2 growth.
Stock Index
Intraday stock index plunged; prior increased state-owned enterprises reformation, national defense and military project concept stocks leaded to drop; over 1500 pieces shares down to the limit and three futures index all slumped. There are three reasons; first, the state-owned enterprises reformation is not accepted by market. The main contribution on soaring in last week is state-owned enterprises reformation but, most reformation is about merger, which is the same as prior CSR and CNR Corp, without new conception; state-owned enterprises reformation cannot beget market confidence and can only be the short-term effect. Second, after national team quitting, it was hopefully that market may finding price by internal logical; market started suspicious of rescue bottom firmness. Third, technically, recent rally force was strong and continued hitting prior pressure level; there were lots of accounts held up. Along with intraday slumping, the accumulated confidence by national team recently was shattered and, old concepts were not convinced any more yet new concept was not ready; there was no crucial concepts and stories to attract market on upward trend; even though there would be a rally trend it would not last long; the possibility of further weakening in the future was huge.

Tuesday domestic and overseas copper market was fluctuated in low level. On macro side, yesterday China stock market sluggish raised the market concern again. Recent published macro data most revealed the weakness of Chinese economy growth; July railway freight volume dive 10.9%, warning sign from keqiang index hammered the market again. Current market was lacked of confidence on Chinese economy and dragged the copper price.
Back to copper market, LME spots discount reduced to $1; inventories increased 2950tons; domestic spots were flat to premium RMB50. Downstream maintain receiving as demand and volume was focused on middleman. News on 18 August, Pumpkin Hollow Copper project under Nevada copper company started to comprehensive clearing operation after receiving license. This license allows 70,000 tons strip mine and underground mine per day, validity from 14 August. Pumpkin Hollow copper reserves about 229,000 tons and Nevada copper company had full ownership of this mine.
Technically, copper market was still fluctuated in low level; LME resistance downed to $5240 and in domestic was RMB 40000. Copper market will in weaken before raise through above price. We recommend avoiding macro risk as for operation.
DCE soybean continued retracing in night session; soybean NO.1 contract was independent of soybean market; domestic soybean spots maintain stabilize and partial of it still raising; yet lacking of volume on purchasing weakened the upward trend. There was inspecting on soybean flow direction at port again currently, which might bullish the domestic soybean market; soybean No.1 contract market maintain strong or observing in short period.
Soybean meal spots maintain stabilized, market stayed in observing; oil plant in strong willing of supporting the price but, cost of forward import soybean continued falling; meals lacked of boosting material in short tendency; predict to continue weakening out of fluctuant. We recommend observing or in shorten mindset on operation.
Yesterday PP futures opened up low and went lower, opened at 7735 and ended at 7640; trading volume increased 15,790 lots to 523,000 lots; holding decreased 6938 lots to 223,000 lots. In upstream, FOB Korea propylene decreased $4, average price was $821.5/ton. On spots side, yesterday domestic PP market price was consolidated in weaken. Futures price was in downturn, which exacerbated the shorten momentum. Merchants slightly shipped and downstream plant purchase in small orders, real market was not good.
Current main quotation of wires, north market was RMB 7950-8100/ton, east market was RMB 8250-8350/ton and south market was RMB 8250-8400/ton.
On operation, current price plainly hammered by moving average system and 8000 level; MACD red column shorten as downward trend. We recommend short positions can be further holding.
                                                                             Dong LV (Investment Certificate NO. TZ008452)