Daily Report 051115 2015-11-05
Macro Economy
US stock market dropped from three-month high point, prior employment data and speech from Fed president Yellen increased the expectation on interest rate hike; S&P 500 index ended down 7.48 point or 0.35% to 2102.31 point. Yesterday released numerous data included: US October ISM non-manufacturing index raised from 56.9 to 59.1, exceeded the widely expectation and, created a second high point from ten years. ADP reported US enterprise October employment increased 182,000 pieces, higher than expectation. US January to September trade volume to China reached $441.6 billion, which was the first time China surpassed Canada became the US largest trade partner. US trade deficit to China was in the record high level but, September trade deficit decreased 15% month-on-month to $40.8 billion, created a seven month low level. Petroleum import created ten year low level. Markit released Euro zone composite PMI raised from 53.6 to 53.9; new order created the fastest growth over the past half year. Fed president Yellen indicated in testifying at Congress, if the economy data bolstered, it was possibly increase interest rate in December; interest was predicted to gradually increase. New York Fed president Dudley as well indicated, complete agreed with the statement on increase interest rate in December but, as well hope payment would increase more. Fed funds futures revealed the possibility of Fed increase interest in December had raised to 58% after the meeting. Meanwhile crude oil and gold both slumped. We considered the possibility of Fed interest rate hike had increased under current condition; US stock, gold and other commodities would continue be hammered in a short-term.
On domestic side, Chinese Premier Li Keqiang chaired a State Council executive meeting on 4 September, determined to deepen the reform on interest rate marketization; promote the domestic demand, stabilize the industry growth; accelerate the restructuring of zombie enterprises; streamline and optimize the enterprise investment and approval on highway. The Xinhua news agency quoted finance minister Lou Jiwei indicated, would reorganize a batch of state-owned capital investment and operation enterprises; the next step would be organize and implement the pilot project on state-owned capital investment and operation enterprises perform the responsibilities of investors directly conferred from the State Council. In addition, China October Caixin service industry PMI raised back to 52.0, exceeded the fourteen month low point in September (50.5), which indicated growth from business activities in service industry rose. October Caixin composite PMI rose back to 49.9 still slightly lower than the threshold 50.0.
From data perspective, improvement sign on October manufacturing and service industry PMI was plainly, combined with official PMI and prior upstream economy data, including financing and credit, the economy activity might had stable performance in short-term.

Stock Index
Yesterday stock index soared, entire brokerage sector rose to the limitation; brokerage declared leverage ratio from financing increased; service PMI raised to 52, higher the September 50.5. After the Thirteenth Five Year Plan released, it proposed the policy on delayed retirement age; decreased social insurance payment; expanded financial industry opening; deployed a batch of significant science and technology project which embedded national strategic intentions. Market believed reform would not stop in the future, especially the financial innovation. Overall, central government reform determination had exceeded expectation which had boosted the market confidence. Yet the sluggish economy was still severe; in the high point were the concentrated locked chips and, it was hard to form a bull market; it only tended to long in a short-term.

Wednesday LME copper price fell after soaring, copper price lost earlier strong profit and ended at $32. On fundamental side, LME spots premium decreased to $11.75, inventory continue decreased 3100 tons. Domestic spots were discount RMB 90- RMB 30. On supply side, Glencore third quarter copper output slightly increased 1% year-on-year to 397,000 tons; in the last three quarters was decreased 2% to 1.127 million tons. The main reason on output decrease was Alumbrera mine about to end and, the production loss from Katanga. Meanwhile, Glencore indicated would raise the eighteenth month output reduction from 400,000 tons to 450,000 tons. Zambia president indicated he would not allow Glencore layoff, or would let other investors take over Mopani copper mine.
Technically, copper price was still fluctuated in interval, after Wednesday LME fell, it possibly down to try the bolster line at $5000. Domestic copper might down to RMB 38000.
Natural Rubber
Yesterday Shanghai rubber fluctuated in low point, US dollar overseas RSS market hammered: domestic spots price 1220-1230 (0), domestic cargo price 1220-1230 (-10), US RSS spots price 1230-1250 (-20), US RSS cargo price 1220-1240 (-20), Singapore cargo price 1240-1260 (-10). On news side: China October heavy trucks sales volume continued decrease 14% year-on-year, increase 5% month-on-month, which conformed to the seasonal pattern.
Overnight US October ADP employment slightly exceeded the expectation; ISM non-manufacturing index set the second top level from ten year. Fed president Yellen indicated it was possibly to hike interest rate in December if economy data bolstered. S&P 500 decreased 0.35%: WTI oil price slumped 3.3%; gold dropped 0.7%; US dollar soared. Overall: market capital sentiment was weak; fundamental on Shanghai rubber was weak; spots enterprises selling at high point.
Yesterday PP futures continue volatile. Opened at 6810 and ended at 6824; trading volume increased 221,000 lots to 1.097 million lots; holding decreased 20082 lots to 416,000 lots. On spots side, yesterday domestic PP market continued slight volatile out of stabilization; partial region with less cargo tried to quoted high RMB 50/ton. Though oil price strong revived and, futures opened high and went higher boosted the practitioners’ confidence, under the bolster of petrifaction temporally stabilized, merchants shipped in the opportunity for promoting trading; open position to cover still in cautious. Procurement from downstream plants had no plainly increase; firm offer trade was mainly in low point.
Current main quoted prices for wires of north, east and south markets are RMB 6700-6900/ton, RMB 7000-7200/ton and RMB 7200-7300/ton, respectively.
As for operation side, current moving average system arranged in short as downward trend; recent price was estimated to continue weaken volatile trend.

                                                       Dong LV (Investment Certificate NO. TZ008452)