Daily Report 121015 2015-10-12
Macro Economy
Last Friday US stock market continued rally; S&P 500 index created the best week performance within this year, price closed raise 1.47 point or 0.07% to 2014.90. From data perspective, US September import price decreased 0.1% on monthly basis, estimation was decrease 0.5%. From Fed trend side, several Fed officers regarded interest rate might increase in this year: Fed vice chairman Fischer indicated, US economy is probably strong enough to increase the initial interest rate within this year and, increase timing should be dictated by slowly domestic employment growth and international development. New York Fed President Dudley regarded, as long as the expectation on inflation and increase was on the track, still estimate interest rate will be increase within this year; yet this perspective was not a commitment. Atlanta Fed president Lockhart indicated, economy was on track for satisfaction, interest rate was proper to increase in October or December. At present, it is worth expecting remarkable US inflation before December, yet it is hard to determine if the 2% goal can be accomplished. According to prior statement from Fed chairman Yellen and other officers that interest rate can be raised if inflation is reviving to 2%, it is high likely to raise interest rate in December though this possibility is diving under recent poor economy data.
On domestic side, central bank expanded a pilot program on relending; it will be expanded to include Beijing, Shanghai, Tianjin and nine other provinces and municipalities on this basis Shandong and Guangdong in earlier stage, to consummate the framework of central bank collateral management. From the issued timing, it is still the measure for “stabilizing growth” under the hammer of hedge property and traditional economic downturn; but in fact current land agent cautious and reserved attitude is the main reason on sluggish real estate investment and, the manufacturing industry may get limited benefit since its liquidity requirement.


Stock Index
Stock Index continued rallying after holidays, SW first grade sectors all rebounded and concept sector was in upward trend. Central bank expanded a pilot program on pledged supplementary lending; prime minister emphasized to hundred-percent accomplished the target of shantytowns redevelopment; news in weekend was bullish. Currently each institution is in light position, periphery assets were increasing; stock market deleverage was almost completed; hammer on selling was not heavy and certain rally requirement existed. In addition, the third quarterly reports officially opened which market put certain expectation on. Factors as stabilizing growth and state-owned enterprises reformation as well got value on expectation. Except for the real economy is still weak and, there is no reviving evidence shown from economic indicators. The financial pressure seems to be higher and higher for the sake of stabilizing growth and, it is hard to persist. Overall, market circumstance and mindset tends to be bullish, revive is required in short term but, we recommend not put high expectation on the rally range.
 
 
Copper
Last Friday copper price soared, the main reason was on the announcement of sharply decrease 500,000 tons zinc output from Glencore driven the nonferrous metals. On macro side, Fed is wary of Chinese economy may drag US economy; market generally believe that US interest rate raise timing has postpone to 2016 which bolster the market. On fundamental side, last Friday LME spots premium raised to $15.25, domestic spots were discount 70 to flat. Last week three main exchanges copper inventory decreased 13488 tons, among which SHFE inventory increased 383 tons; LME inventory decreased 14925 tons; COMEX inventory increased 1054 tons. Overall, current market sentiment has revived; concern on Chinese economy has slowed down. The main reason of copper price continues dropping is on the wary of Chinese economy and Glencore decrease inventories; both two factors have slowed down currently, we as well pay attention on whether copper price may open the rally scope.
Technically, LME copper five-month moving average system is at $5315, domestic January contract resistance is 40000; we recommend focus on the copper price performance on Monday.


Soybean
Soybean No.1 contract continued weak trend, soybean in Heilongjiang was gradually come into market; since this year new bean quality is not good as last year and moisture is high, the terminal demand is languished; market generally believe spots will fall back in short term which exacerbated market bearish expectation. Soybean spots in west Heilongjiang decreased to RMB 3900/ton and were far lower than domestic soybean, which hammered domestic soybean to some extent. We regarded in a short term, soybean No.1 contract price will under the influence of spots weaken trend, and the weak pattern in mid-term was plainly; current 1601 futures price has down over RMB 3900/ton. From the cost of the warehouse receipt perspective, market and spots price almost leveled off, hence the risk of futures continue chasing shorten was out of proportion to its profit; the short holdings in high point before holidays can be further held, margin-hunting and long positions still need to wait.
Soybean meal as well showed weaken volatile pattern, since overseas market still has not get rid of low point volatility and, domestic supply is sufficient, terminal performance is flat, DCE soybean will maintain volatile and resist dropping sentiment.


PP
Last week PP futures revived in low point along with rallied crude oil. On upstream, up to Friday night, FOB Korea propylene average price was $490/ton. From device side, current operation ratio was about 84.5% and was lower than the ratio before holidays. On spots side, along with futures rallied for two continue days, partial petrochemical enterprise raised EXW, which boost the practitioners’ sentiment; market quotation went high but, downstream reserved attitude was thin; trading volume improved but was not heavy.
For instance of wires, main quoted prices of north, east and south markets are RMB 7450-7500/ton, RMB 7600-7700/ton and RMB 7650-7800/ton, respectively.
As for operation side, moving average system ranged in short; though rallied for two days, this upturn trend was under the boost from crude oil and stock market, and whether this rebound trend may continue still was reserved. We recommend wait and see.
 
 
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