Daily Report 171215 2015-12-17
Macro Economy
US stock rallied since Fed ended the seven-year-long zero interest rate and, comforted investors that this world's largest economic entity was resistant enough to withstand gradually interest rate hike in the future. S&P 500 index increased 29.66 point or 1.45% to 2073.07 point. FOMC voted to increase Fed funds rate aim to 0.25%-0.50% as the first interest rate hike within ten years. Decision makers as well predicted the proper interest rate level was 1.375% by the end of 2016, implied there would be four times interest rate hike at 25-basis point rate. Fed president Yellen indicated on press conference that decision makers made this interest rate hike decision after judging the condition was “satisfied”, a long prolongation on interest rate hike would cause tighten risk. Yellen indicated US economy was in good potential and she didn’t see any factors showed negative results on US. FOMC didn’t plan to hike interest rate mechanically, would make decisions base on the data; we judged interest rate would hike gradually. From policy statement, Fed held stronger confidence on labor market and, emphasized again on low inflation level. But Fed believed in a further increasing labor market and inflation. Overall, inflation in later period would become key factor on Fed tightening policy step. Fed will decide whether to increase rate again at FOMC in Mar, June, September and December next year. Current market condition on Fed funds futures indicated the possibility on interest rate hike in Mar was about 44%. But on the occasion inflation was under control and economy was slowly reviving, combined with attitude from Fed, we considered interest rate hike speed in the future would inferior to guidance from Fed and expectation form market. In addition, before Fed takes new action, it will give sufficiently expectation; the following interest rate hike speed might be clarified in January meeting.
Wednesday copper market trading and investing was thin; copper price narrow fluctuated and waited for FOMC result. On fundamental side, LME spots discount narrowed $8 to discount $4; inventory turned to decrease 875 tons. Shanghai copper spots were discount RMB 60 to premium RMB 20, trading and investing in spots market was stagnant; consumer company still purchase on demand. On supply side, since Zambia, the second largest copper producing country in Africa critically short of electric power and, copper price was at years low point, Zambia indicated would continued shut copper mine in next year. Zambia copper yield in this year was 600,000 tons, decreased 15.3% compare to 708,000 tons in last year. Zambia predicted to increase its copper yield in 2016 to 700,000 tons in the mid of October this year. Technically, if bolster at $4550 was effective, copper price was capable of rally to $5000. If domestic February contract increased above RMB 35700, copper price might continue rallying. We recommend continued holding long positions on operation.
Soybean No.1 contract hovering at prior low point; pattern on strong meal and weak oil continued. Soybean price in northeast was strong out of stabilizing and, edged up in partial areas; most demand subjects stayed in observing. Grain shipment from merchant side was worse than last year, import soybean consumption was in increase tendency at selling area; spots sill in bullish for a short-term but, scope was limited. We considered soybean No.1605 contract fluctuation range was between RMB 3600-3800/ton in short-term, recommended to ask at low and bid at high among this interval.
Soybean meal price was stabilized; most areas and oil plants were stabilized; trading volume slightly increased. Though domestic demand revived, spots supply in most areas was sufficient; oversupply was still the crucial problem in current market and was the source of hammer on spots market. Wednesday oil against meal ratio was 2.37:1, tendency was weak. As for operation, we recommend arbitraging between long meal and short oil.
Natural Rubber
Yesterday Shanghai rubber horizontally fluctuated, price at US dollar spots market stayed in same: domestic spots price 1100-1120 (0); domestic cargo price 1120-1140 (0); US dollar RSS spots price 1200-1220 (0); US dollar RSS cargo price 1200-1230 (-10). On news side: Beijing time Wednesday offshore RMB showed two continue rapidly rally, trader at Bloomberg indicated, Chinese-funded bank was the main selling momentum on USDCNH; Fed hiked 25-basis point rate overnight, impact from risk assets was not huge under market fully expectation. Overall: market capital was in neutral mindset; rubber fundamental was weak. Though mid-long-term bearish tendency was hard to shift under the guidance from fundamental, we recommend paying attention on phased price reviving trend.
                                                                      Dong LV (Investment Certificate NO. TZ008452)