Daily Report 081215 2015-12-08
Macro Economy
Yesterday US stock market ended low; the slumped oil price dragged the energy sector and raw material sector. S&P 500 index dropped 14.62 point or 0.7% to 2077.07 point. On US side, several Fed officers made speeches. St. Louis Fed president Bullard indicated, the FOMC dovish position and the delayed interest rate hike decision since the mid of 2014 was because of the wrong prediction on critical economic variable as GDP growth, unemployment rate and inflation rate. Atlanta Fed president Lockhart indicated, condition on interest rate hike was quite satisfied, the US economy was on track to solid and modest growth, approached 2% instead of 3%. Atlanta Fed president and St. Louis Fed president was the FOMC voting member of this year and next year, respectively, their attitude would bring a significant impact on interest rate hike speed in December and in next year. In addition, on the commodity market, yesterday crude oil price slumped; WTI main contract dropped $2.51, decreased 6.25%; Brent crude oil as well dropped 6%. This condition was the reaction from the output policy on last Friday OPEC meeting, from the long-term version, no production reduction and Iran reentered the global oil market, oil price was estimated to under hammer. And this would curb the US inflation to a certain extent, which become the big push to next year Fed slowly interest rate hike.
From domestic side, China's foreign exchange reserve fell to $3.44 trillion in the end of November, far below the expected $3.49 trillion and set the three year low point, decreased $87.2 billion compare to October, as the third-largest monthly decrease range since 1996. We regarded the capital outflow and recent strong US dollar caused by RMB devaluation was the crucial reason of it. US dollar index raised 3.39% in November. Under this influence, RMB offshore/ onshore rate expanded to 640 point, discount expanded to 1%. From later stage perspective, Chinese economy is under hammer, domestic and overseas interest rate spreads narrows, difference from China and US monetary policy and, the decreased central bank political pressure after RMB joined SDR all continued hammering RMB. The slowly controllable devaluation might be continuing. In addition, China would release November trade data in intraday, expected export decrease 5% year-on-year, in October was decrease 6.9%; import would decrease 11.9%, in October was decrease 18.8%; trade balance was predicted surplus $64 billion, in October was surplus $61.64 billion. These data need to be focused.
Stock Index
Yesterday stock market slightly fluctuated; prior raised brokerage and insurance sector slightly decreased; concept sector rose; Ventures Index soared 8%; IP traffic monetized, new three board index both rallied 5%. Supply side reform was the main expectation on current market.  The central economic working conference will be held at the mid of December, it may involves loose financial policy, loose monetary policy and supply side reform. The State Council convened a meeting last week, emphasized must intensify reforms from both supply and demand side. At present, stock index was swinging between the reform expectation and downward economy data; index went down if market mindset turned to economy downward, went strong if turned to reform. November foreign exchange reserves shrunk over expected and, would increase the market concern on the real economy; in addition, brokerage and bank went weak these days, it might continue weak tendency in a short term; whole pattern maintain fluctuation in mid-term.

Monday overseas copper price fail to continue reviving trend after domestic market closed, copper price ended low. On fundamental side, LME spots premium increased $1.75 to $0.75; inventory continue decreased 1875. Domestic spots were discount RMB 30 to premium RMB 30, decreased RMB 40 compare to last Friday. Partial import copper selling in the spots market, market overall supply was sufficient. On supply side, CODELCO indicated, Ecuador Llurimagua copper mine daily output might reach 60,000 tons. The company planned to invest $14 million on Llurimagua copper mine in 2016. In addition, Chile November copper export value was $2.73 billion, decreased 9.1% year-on-year. Technically, copper price is fluctuated within interval, if LME rise above 4670, next target will at $5000. If domestic copper price rise above 35400, next target will at RMB 38000. We recommend focusing on bid in low point as for operation.
DCE soybean retraced in the night session following US market, price might fell on intraday market; oil against meal ratio was strong in the fluctuation. Domestic soybean demands were slightly recovered but, under the influence from import soybean and replacement, spots price overall were stabilized, part of spots might continue rallying. Purchase price in northeast region soybean still focus among RMB 3700-3800/ton; north china price was RMB 4280-4400/ton. Soybean No.1605 contract still focus on short and long divide at RMB 3800/ton. Soybean meal spots slightly raised in most areas, spots trading were thin, basis pricing in common. Current nationwide oil plant operating ratio was high, December port arrival amount was huge, and the hammer from supply side continued. Oil against meal ratio was 2.45 to 1; tendency was upward in a short-term. As for operation, keep holding arbitrage between oil and meal; if soybean oil and palm oil spreads narrowed can be focused.

Natural Rubber
Yesterday Shanghai rubber fluctuation went strong; US dollar spots quotation in upward trend. Domestic spots price is 1120-1140 (+10); domestic cargo price 1140-1160 (+10); US dollar RSS spots price 1200-1220 (+20); US dollar RSS cargo price 1220-1230 (+30). On news side: overnight crude oil slumped and, set the nearly seven year low point $37.48; global commodity price as well under hammer, including gold price dropped $15, taking more than half raised profit in last Friday. Bloomberg commodity index was 79.97, set the sixteen years low point. Overall: market capital sentiment was weak; rubber fundamental was weak; though the mid-long-term shorten tendency led by fundamental was hard to change but, need to pay attention on phased price reviving.
Yesterday PP futures fluctuated in low; opened at 5627 and ended at 5710; trading volume decreased 169,000 lots to 1.303 million lots; holding increased 18454 lots to 473,000 lots. On spots side, yesterday domestic PP market price slightly dropped. Enterprises from Sinopec north china and central china transferred from fixed price to list for sale which hammered the practitioners’ mindset. Partial enterprises from Petro China guide price reduced; bolster to market supply cost weakened, most quotation slightly surrendered profits. Receiving demand from downstream plants was flat, purchased as rigid demand.
Current main quoted prices for wires of north, east and south markets are RMB 6350-6500/ton, RMB 6500-6750/ton and RMB 6650-6900/ton, respectively.
As for operation, current moving average system bearish pattern continued; MACD red column slightly shortened, bearish pattern continued. Recent crude oil was weak, no much progress on macro economy. This round reviving was hard to continue. Prior short holdings can be held as for operation.
                                                                                   Dong LV (Investment Certificate NO. TZ008452)