Daily Report 161015 2015-10-16
Macro Economy
Chinese September social financing scale increments rose to RMB 1. 3 trillion and was higher the August RMB 1.08 trillion, as well higher the expected RMB 1.2trillion. September new RMB loan was RMB 1.05 trillion, higher the expected RMB 900 billion. M2 increased 13.1% on yearly basis at the end of September which meet the expectation. China's foreign exchange reserve decreased RMB 264.1 billion to RMB 25.8 trillion in September, created the lowest decrease range over three months. This indicated capital outflow has slowed down, yet the foreign exchange reserve decrease range in third quarter still created a record high at RMB 890 billion. Though all the economy data indicated were over the expectation, the deflation risk behind the price of commodities still exist in short-term; scope on reduction of interest and reserve still exist.
Thursday domestic and overseas copper market was volatile. On fundamental side, LME spots premium continued decrease to $16.5, inventory decreased 3525 tons. Domestic spots were premium RMB 20-70. As for supply side, Rio Tinto third quarter copper output decreased 30% on yearly basis to $115,000, which adjusted the copper output expectation in 2015 to 510,000 tons; prior expectation was 500,000 -535,000 tons in 2015. On the LME week, Antofagasta regarded, since the measure from China on economy further slowing down, Chinese demand was moderately reviving which will absorb the increment from supply side, and hence the copper price was already near the bottom. Technically, copper price revive trend still exist; it was likely to challenge rebound high point recently.

Soybean No.1 contract narrow fluctuated in recent days, quotation on spots in Heilongjiang area dropped below RMB 3900/ton, new bean in south as well dropped 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 are stabilizing in most areas, quotation generally at 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 further performance from US soybean. As for operation, soybean NO.1 contract may hold short position in high point; soybean meal hold long position in light holdings.
Natural Rubber
Thursday Shanghai rubber rose with increased holdings in the mid market and, back to fluctuation at the end. Variation on spots was small: domestic spots price 1300-1310 (-10), domestic cargo price 1310-1330 (-10), US dollar RSS spots price 1360-1380 (0), US dollar RSS cargo price 1360-1370 (+10), Singapore cargo price 1340-1360 (0). On news side, CAAM data revealed: domestic auto sales in last month decreased 2.3% on yearly basis, overnight US crude oil inventory increased. Overall: after the old warrants in third quarter cancelled, Shanghai rubber price was constantly approaching to 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 went low in fluctuation; opened at 7237 and ended at 7214; trading volume increased 3552 lots to 732,000 lots; holding increased 9224 lots to 315,000 lots. On spots side, domestic PP market continue falling, most prices were dropped near RMB 100/ton. EXW in partial petrifaction of Sinopec east China, Petro China east China, northeast and southeast continued reduced; which weakened the bolster to the supply cost and hammered the sentiment from dealers. Merchants initiatively shipped followed falling trend. Demands from downstream were insufficient, limited firm offer from plants side further exacerbated downward trend; yet overall trading and investing momentum was thin.
Current main quoted prices for wires of north, east and south markets are RMB 7250-7450/ton, RMB 7400-7550/ton and RMB 7550-7650/ton, respectively.
As for operation side, current five-day moving average system turned up, yet ten-day and twenty-day moving average system ranged in shorten and, price weakened falling. Overall was still the weaken pattern. But recent direction from macro and crude oil was unsteady, price was closing prior low point 7000, the price may volatile. It was expected to be narrow volatile in weaken recently, we recommend maintain observing; the speculators may shorten in short-term at high point in the trend combination from crude oil and stock market.

                                                                            Dong LV (Investment Certificate NO. TZ008452)