Daily Report 021115 2015-11-02
Macro Economy
NBS data revealed October manufacturing PMI leveled off 49.8, indicated a three months shrink in manufacturing industry. Non manufacturing PMI decreased from September 53.4 to 53.1, created a twenty months low from 2008. From detail perspective, manufacturing sub-index edged down and new orders raised; new export orders decreased; finished product inventory increased; raw material inventory decreased. Demands continuously edged up; improved production drive the inventory upturn momentum. In addition, Caixin October China manufacturing PMI would be released on 9:45 this morning, expectation was 47.6 and in September was 47.2. Focus on it.
Stock Index
Last week stock index fluctuated and fell in Friday. PMI released in Saturday was 49.8, slightly lower than expectation; effect on stabilizing growth started to shown. Overall is not optimistic, technically, since October rally trend had met the hammered from July to August and, weakened in upward trend; difficultly on rally had extended. Firstly, on macro side, though China had published various kinds measures to stimulate stock market; fiscal expenditure was vigorous; central bank decreased interests and reserves but, the stabilizing on debt increasing was hard to continue, effectiveness was lower which cannot show a good expect to market. Secondly, on capital side: though current capital was surplus; fixed income yield decreased but, the capital flight were continuously happened, declared the qualified capital was not optimistic on domestic risk assets; the risk appetite increase was hard to persist. Thirdly, on trading side: reviving from growth enterprise market was large but turnover rate was huge as well, risk was accumulated. There was no new concept in the future. The combine from internet industry was increasing; recruitment was shrinking which might indicated profession asset risk appetite was decreasing. Fourthly, technical side: 60 days moving average system was hammering, the pressure on high point was huge; locked up accounts were large; there would be more account unlocked in higher point and, it was hard to attract asset by money making effect. Revive was hard to sustain. As for operation, take the chance to shorten at high point in the fluctuation.

Last week copper market trading and investing was thin, copper price gravity edged down in second second half of the week. On fundamental was still strong in overseas and weak in domestic, LME spots premium reached $17.5, last week inventory decreased 9825 tons but, domestic spots continuously discounting; inventory in last week slightly decreased 1579 tons. Divergences from supply side still bolster the copper price. The latest news, Russia Norilsk nickel third quarter copper output was 92,000 tons, increased 3.4% year-on-year base. Technically, copper price was still volatile, LME was $5000-5300; in domestic was RMB 37800-39500. We recommend keep observing as for operation and waiting for copper price clarified.
Soybean spots in northeast continue downturn, lowest quotation in northeast region decreased to RMB 3720/ton. Though recent south protein plants started to increase purchasing which certain bolster the weakened spots, the weakened condition in regions was hard to have plainly improvement in short term.
Soybean meal spots were resisted the downturn, operation ratio in oil plants were high; purchase demand in downstream was low; market trading and investing momentum was thin; quotation was at RMB 2680-2740/ton; last week oil and meal specific value raised from last weekend 2.15:1 to 2.17:1; specific value remain strong.
As for operation, we recommend holding soybean No.1 contract in short and, arbitraging at long oil and short meal.
Last week PP futures dropped in volatile. In upstream side, up to Friday night, FOB Korea propylene average price was $580.5/ton. From device side, current operation ratio was about 89%, slightly higher than last week. On spots side, last week spots market price continue lower; bearish momentum was thick; difficultly on shipping extended. Petrifaction reduced EXW, merchants quoted in surrendering part of profits but, inventory cover demand in downstream was low; purchase as demand; trading and investing was poor.
Current main quoted prices for wires of north, east and south markets are RMB 6850-6900/ton, RMB 7050-7250/ton and RMB 7200-7400/ton, respectively.
As for operation side, current moving average system arranged in short as weak pattern; recent price was estimated continue weaken volatile trend.
                                                                                Dong LV (Investment Certificate NO. TZ008452)