Daily Report 151015 2015-10-15
Macro Economy
Chinese Prime Minister Li Keqiang presides over the executive meeting of the State Council on 14 September and, determined to put RMB 140 billion into broadband networks construction in countryside and remote area; deployed accelerate development on E- business in countryside and, determined the measures on developing express industry. Ma Jun, the Chief Economist of China Central Bank indicated, central bank extended the scope of qualified collateral in credit assets pledged supplementary lending was not the Chinese quantitative easing, which would not has obvious influence on liquidity gross. We considered, current difficulty on domestic enterprise financing issue was not on the commercial bank funds shortage, re-lending policy may provide more circulating funds to market but it was not the fundamental way; which urgent to be solved was bank’s caution in loan caused by declined economic vitality. In addition, yesterday data revealed, China September CPI increased 1.6% on yearly basis which was lower the expected 1.8%, prior value was 2.0%; PPI decreased 5.9% with a continue forty-three months slump, expected was decrease 5.9% and prior value was decrease 5.9%. Price growth further decreasing verified deflation need more focus than inflation, yet from PPI perspective, the ratio of industrial products price stabilizing has increased. Data revealed the scope of central bank QE policy still exist, combined with other monetary and financial data, foreign exchange liquidity condition, the window of decrease reserve in fourth quarter still opened and, possibility on reduction of interest as well exist. In addition, China central bank will issue September money supply data in intraday. From the estimated mid-value of Bloomberg research, M2 would increase 13.1% on yearly basis, in August was 13.3%; new RMB loans would be RMB 900 billion, in August was RMB 809.6 billion; Social financing scale increments would be RMB 1.2 trillion, in August was RMB 1.08 trillion which shall focus on.
Wednesday domestic and overseas copper was strong, copper price has get rid of recent adjustment trend and slightly increased. Wednesday Chinese weakened price index failed to resist the copper rebound trend, market expected Chinese would issue more stimulate policies. In addition, Fed Beige Book revealed the strong US dollar had damaged manufacturing industry and tourist industry; intraday US had came into the third quarter report release period, Walmart indicated had severely affected by strong US dollar which all triggered US dollar slumped and, this bolstered the copper price. LME reduced global economy growth expectation to 3.1%, in 2016 would be 3.6%; weakened global economy was still the crucial reason of copper price hard to get rid of weak trend. On fundamental side, LME spots premium continue increased to $18, inventory decreased 3425 tons. Domestic spots discount RMB 10 to premium RMB 50. Recent news on copper output reduction still bolster the copper price. Zambia estimated this year output would be 600,000 tons, decreased 15% on yearly basis which was far below expected 740,000 tons. Copper output in 2016 was expected increased to 700,000 tons. Since copper price slumped, recent announcements of prolong or decrease investment kept coming, Chile indicated the foundation mining industry project from 2014 to 2026 would decrease 4.6%. Glencore and Anglo American prolonged the expand production plan on jointly Collahuasi copper mine. But now is still in the peak supply period, reversal would happen after 2017. Technically, copper price is still in reviving, possibility of challenging prior rebounded high point recently is high.

Soybean No.1 contract was strong in recent and weak in the future, spots price in partial Heilongjiang are continues weaken, currently quotation in most area dropped to around RMB 3900/ton; new bean in south as well fell below RMB 3900/ton which pernicious influence the new bean in northeast area; demand from northeast market was predicted further sluggish in short term. We regarded soybean NO.1 contract price in short-term was influenced by weakened spots, the weakened midterm pattern is obviously, recent rally still can be considered a rebound from weak trend.
Soybean meal market is in reviving trend, spots raised from RMB 20 to RMB 50 in most areas; quotation is generally among RMB 2750-2850/ton. On one hand is driven by the rebounded overseas market; on another hand is under the boost from good basis sales and tighter supplement. But domestic raw material supplement is sufficient; demand from terminal side is flat, the altitude and strength of DCE soybean meal rebound trend in short-term still rely on US soybean further performance. As for operation, soybean NO.1 contract may hold short position in high point; soybean meal hold long position in light holdings.
Natural Rubber
Yesterday Shanghai rubber fluctuated in weak, spots price slightly varied: domestic spots price 1310-1320 (0), domestic cargo price 1320-1330 (0), US dollar RSS spots price 1360-1380 (0), US dollar RSS cargo price 1350-1360 (0), Singapore cargo price 1340-1360 (0). On news side, yesterday issued Chinese September CPI increased 1.6% on yearly basis; PPO deceased 5.9% on yearly basis and was the forty-third month dropping. Overall, after the old warrants in third quarter cancelled, Shanghai rubber price was constantly approaching the spots price; once the macro stabilizing expectation appeared, Shanghai rubber still got a certain revive momentum which mainly from the increased market risk appetite.  The medium level rebound in Commodity industrial product need the implement from reform dividend; otherwise it is hard to break through width fluctuation at the bottom.
Yesterday PP futures fluctuated in low point, opened at 7260 and ended at 7248; trading volume increased 118,000 lots to 723,000 lots; holding increased 5386 lots to 306,000 lots. In upstream, FOB Korea propylene decreased $5; average price was $525/ton. On spots side, yesterday domestic PP market edged down, most quoted down RMB 50-100/ton. Sentiment of dealers in spots market was flat, with partial Petro China guide price reduced, the shorten momentum spread. Plants in downstream were no rush to receiving, purchase in rigid demand and firm offer was weak.
Current main quoted prices for wires of north, east and south markets are RMB 7350-7450/ton, RMB 7600-7700/ton and RMB 7650-7800/ton, respectively.
As for operation side, current price is resisted by 20, 40, 60-day moving average system; upward momentum was insufficient as a weak trend. In addition, the crude oil and macro side is not optimistic, it is high likely to continue weak trend recently.
                                                                   Dong LV (Investment Certificate NO. TZ008452)