Daily Report 160915 2015-09-16
Macro Economy
Yesterday US stock market, retail sales data showed consumption expenditures was resilient and, inventors started to assess other majority data and the possibility of Fed interest rate raising. S&P 500 index raised 25.06 point or 1.28%, ended at 1978.09 point. As for data perspective, US August retail sales increased 0.2%, July increase scope up revised to 0.7%, while August value of industrial output decreased 0.4% on monthly basis, anticipation was 0.2%. FOMC will hold a two-day monetary policy conference from 16 September, economist and analysts hold different opinions on whether interest rate would raise in this week. Andrew Levin, former special Advisor of Bernanke and Yellen claimed interest rate rising will be a serious policy fault; Gross questioned logic of Fed interest rate raise. The federal funds rate futures showed probability of interest rate raise in this month was 28%; in December was 63%, it was likely to postpone raising rates. On European side, German September ZEW investor expectations index decreased from 25 in August to 12.1, continued dropping for six months. Ewald Nowotny, member of ECB Governing Council indicated during interview that may consider to prolong or to expand asset purchase program from ECB. We regard that Euro zone CPI was for sure slowly rally, expedited QE would speed up this process and if commodity price further rallying, it was not necessary for QE substantial increasing in consideration of current slowly reform problem with in Euro Zone. In addition, the House Republicans planed for a vote in the coming weeks to relieve lasted 40 years US petroleum export ban. If the prohibition was successfully relieved in this vote, global crude oil market would be dragged in fluctuation again and price would further drop.
Stock Index
Yesterday stock index further falling, entire SW first grade industry went low; banking sector dropped less than 1%, national defense and military sector tumbled 8.6%; computer, nonferrous metals and steel sector all dived about 7%. Rally from prior days was cause of: detailed regulations from state-owned enterprises; anticipation of stabilizing growth; substantial shareholder in listed company increased holdings. But ever after rally trend, market tumbled and confidence was fragile. In comparison to the present economic situation, most stock valuation was not cheap, which can be the optimism anticipation. From market risk preference side, the old concept was out of believing and new one was lacked of attraction. Though state-owned enterprise was the present hot spot, most substances had not deviating from the expected and were hard to motivate market confidence. It was hard to form slow bull, and might go low in fluctuation.

Tuesday domestic and overseas copper price got bolster from retracement, price edged up at market closing. China stock market slumped on Tuesday morning hammered copper market but, market transferred attention to copper output reduction and Fed meeting afterward. Market held big divergence on Fed meeting in Wednesday and Thursday; Tuesday US retail and industrial output data was lower than anticipation and, market regarded this might postpone Fed interest rate raise. But market also had voice on, it will be better raising interests early; the hanging shoes would brought larger negative effects. IMF considered interest rate raise was disadvantage for the liquidity in developing country. We will wait for a clearly situation from meeting.
On fundamental side, LME spots premium decreased was $13.75, inventory continue decreasing 3350 tons. From supply side, after large number of mineral declaring reducing output or stopped production recently, China nonferrous metal mining also declared, Luanshya Baluba Copper Mines and slag beneficiation project would stop production in 8 September since Zambia reduced electric power; it was estimated 6000 tons refined copper would be impacted. Techniacally, copper price was still in rally trend and would adjust in short term, waited for Fed meeting.
DCE soybean was weak in fluctuation, meal was strong and oil weakened; market fail to form persistence unilateral price; mid-Autumn and National holiday was about to come in two weeks and market observing momentum was thicker. Domestic soybean spots were weak in stabilizing, along with new grain coming, market stay in observing. Since both supply and demand side hold different opinions on latter market, purchasing and selling was thin.
Soybean meal spots continued rallying, most regions raised RMB 30-50/ton, quotation mainly at RMB 2700-2760/ton; stock up before holidays made good trading volume to market and certain stimulated market for short term; overseas market was strong but, oversupply circumstance had no changes; soybean meal short term tendency was referenced to whether US soybean may up through 900 cents. We recommend holding slight positions in short term as for operation.
                                                                   Dong LV (Investment Certificate NO. TZ008452)