Daily Report 261015 2015-10-26
Macro Economy
PBOC announced reduced lending and deposits ratio to 25 point on Friday night, reduced deposit reserve ratio 50 point and, remove the float cap on deposit rate. This time rate and reserve reduction exceeded the market expectation, which indicated decision-making level regarded that hammer on Chinese downward economy was huge; aimed on reduce the social financing cost and injected large amount of basic money. But the effect from the policy need to be released slowly, and impact would be limited. This policy had reduced benchmark deposit rate to 1.5% and, the latest CPI data revealed the inflation rate was 1.6%, which indicated China had nominally came into the age of “negative interest rate”. In the second place, released the one year or below period float cap on deposit rate indicated China deposit rate marketization was almost accomplished. Both interest and reserve reduction hammered the RMB on a certain extent; offshore yuan slumped after the news released but, central bank still got certain capacity to control the exchange rate; sharply devaluation may not appear. Stabilizing foreign currency market might make foreign exchange reserve dropped, October and November foreign exchange outflow was expected to maintain in high point.
Last Friday copper price upward momentum got resistance and dropped at closing. On fundamental side, last Friday LME spots premium edged down to $7.25, domestic spots discount RMB 50 to premium RMB 40. Copper inventory from three main exchanges in last week increased 2637 tons; SHFE inventory increased 11387 tons, LME inventory decreased 13375 tons, COMEX inventory increased 4625 tons. From supply side, Cochilco decreased Chile copper output in 2015 from 5.88 million tons in July to 5.68 million tons. The reduction news from supply side was hard to resist the hammer from insufficient consumption. Technically, LME copper resistance at 5319, copper price would only open the revive scope if this price had broken through. Domestic January copper focused on the effectiveness from recent low point RMB 38650.

Soybean spots in northeast continue downward trend, current unsalable market was serious; Dropped price in north China further hammered the spots in northeast and, trading volume was poor; new grain digested slowly would extend the selling cycle, soybean No.1 contract was expected to continue weaken in low point.
Soybean meal spots dropped in stabilizing, current quotation was generally at RMB 2720-2780/ton; current oil plant operation ratio at port was normal; inventory in raise trend; hammer from supply side to market further exacerbated. Recent grease was in strong performance which caused domestic meal price fell to prior low; after price up through 2600, maintain reverse weaken mindset. As for operation, we recommend held shorten in slight positions for soybean No.1 contract; long in grease and shorten in meal.
Last week PP futures continue weakened. In upstream, up to Thursday night, FOB Korea propylene average price was $570.5/ton. As for devices side, current operation ratio was about 90.4%, slightly higher than the week before last one. On spots side, oil futures price continuous dropped which hammered the market sentiment; the sufficient supplement as well hammered the market; market was still in the period of decreasing inventory. Petrochemical enterprise reduced under hammer, market price continuously dropped.
Current main quoted prices for wires of north, east and south markets are RMB 7000-7100/ton, RMB 7150-7300/ton and RMB 7350-7500/ton, respectively.
As for operation, moving average system still arranged in shorten as weak pattern but, price had close to the low point in this year; bolster might at 7000; we predicted would still in weaken narrow fluctuation recently and, recommended stay in observing.
                                                                   Dong LV (Investment Certificate NO. TZ008452)