Daily Report 111115 2015-11-11
Macro Economy
On domestic side, yesterday released data revealed, October CPI increased 1.3% year-on-year was lower than expectation; October PPI decreased 5.9% year-on-year for the forty-fourth month continuously dropping. Specifically speaking, growth on food price slowed down, including pork price growth further dropping; fresh vegetable growth in faster down trend; residence price growth as well slowed down, core CPI dropped for the second month. Overall, inflation growth was lower than expectation and, PPI continuously had no improvement, which revealed the demand especially investment demand was insufficient. Domestic inflation risk was plainly and, was about to worsen; it was necessary to further easing, interest rate and reserve reduction was predicted to release before the end of the year. In addition, China October total social retail goods would be released at 13:30; predicted to increase 10.9% year-on-year and was leveled off September growth. Meanwhile October industry added value would be released, predicted to increase 5.8%, in September was 5.7%. Excluding farmers fixed investments from January to October expected to be 10.2%, prior was 10.3%. Above data should be focused.

Stock Index
Yesterday President Xi talked about stock market: prevent and relieve financial risks, accelerate forming the stock market which is with fully financing function, solid fundamental policy, effective market supervision, and adequate protection on investors. The speech had injected bullish on reform and stock market, index was possibly further increasing combined with yesterday high point market. This reviving was emerged from over expected central reform determination under the sluggish asset allocation; market place hopes on reform over and over again and, the enthusiasm would not be put out temporally. But the upward trend need coordination from macro data, both import and export slumped in the weekend; US non-agriculture employment was better than expectation; do not hold high hope under the condition of high possibility on interest rate hike. The ceiling of IF would be 4000 point, before that price might crawl slowly or volatile moving.
Tuesday copper price fluctuated in the low point after broke through the bolster line. On fundamental side, LME spots premium rallied back to $14, inventory decreased 2500 tons. Domestic spots were flat to premium RMB 50, demand was still weak. On supply side, Antofagasta predicted its Antucoya project and Centinela, Encuentro Oxide expansion project would make Chile long-term output increased to 900,000 tons per year, 28% higher than in 2014. Los Pelambres expansion project would increase 95,000 tons copper annual output. The second processing plant of Centinela would bolster the output growth from Antofagasta after 2019. Michilla mine would be closed in the end of the year. In addition, Glencore indicated, the operation time of its Mount Isa refinery plant at Queensland and Townsville cooper refinery would be extended. This had been predicted to be closed in 2016 and 2017.
Technically, copper price was adjusted after broke through bolster line, we focused on the effectiveness from resistance line; LME was $5000, in domestic was RMB 38000.
DCE would continue weaken downward trend under the impact from bearish overseas data. Northeast region soybean downturn was slowed down; since farmer was reluctant to sell out and, North China soybean price rallied, current northeast market was in the condition of nominal price; trade grain was still unsalable, market was in the awkward condition. DCE soybean No. 1605 contract focused on the bolster at 3800; prior positions may consider taking profits at this point.
Soybean meal spots decreased RMB 10-20/ton in most areas, market was still affected by both the increased supply and sluggish demand, and bearish sentiment remained. Oil against meal ratio was 2.21:1 in the night session, the ratio show the sign to the ceiling.
As for operation, soybean No.1 contract short holdings should stop profit and close positions; if oil against meal ratio break 2.2:1, arbitrage holding between long oil and short meal should stop profit and close position.
Yesterday PP futures continue dropping; on spots side, yesterday domestic PP market slumped, entire price down RMB 100/ton. EXW from Petro China north China, northeast, Sinopec northeast reduced, futures opened low and went lower, market bearish momentum thicker; merchant shipped in surrendering part profit for promoting trading. Firm purchase in the downstream plants was more cautious, trading was for primary production; trading and investing was thin.
Current main quoted prices for wires of north, east and south markets are RMB 6550-6700/ton, RMB 6700-7000/ton and RMB 6900-7200/ton, respectively.
As for operation, current moving average system arranged in short, MACD exposure downward extended as weak pattern; recent price was estimated to continue weakening.
                                                                           Dong LV (Investment Certificate NO. TZ008452)