Daily Report 221215 2015-12-22
Macro Economy
US stock market soared at the last moment; financial stocks and technology stocks led to rally from lowest level in October; S&P 500 index increased 15.63 point or 0.78% to 2021.15 point. On US side, Atlanta Fed president Dennis Lockhart indicated Fed would hike interest rate gradually but, would determine it base on economy data; gradual interest rate hike means rate would not be hiked in each meeting; actions would be taken in every second meeting. For now, partial Fed officers regarded the economy condition was enough for four interest rate hike in next year and, if this condition continued, frequency of interest rate hike might be fast; we would continued focusing on this situation. In addition, US would release an annualized third quarter GDP at 1.9% compared with 2.1 percent reported in the prior estimate.
On domestic side, according to the news from Xinhua News Agency, China's Central Economic Work Conference came to a close at yesterday. The meeting emphasizes during next year and next period, a more powerful proactive fiscal policy is required, increase fiscal deficit ratio and, a more flexible prudent monetary policy to create an optimum money environment for structural reform. In addition, it as well mentions accelerates the structural reform and, resolves excess capacity and inventory, especially inventory on real estate market. We regard the focus in the future is fiscal policy, from this year perspective the fiscal policy hasn’t accomplish the expected easing level, essentially; level on deficit rate increase in next year and more important the strength on tax reduction, will be the focus from fiscal policy in the future.
Stock Index
Yesterday stock index IF soared 100 point, Shenwan all first class industry raised. Food and beverage sector soared 5.1%; household appliance sector raised over 4%; bank sector raised 3.5% and blue chips boosted. Content of China's Central Economic Work Conference released, it indicated the five tasks in 2016 was to solve excess industrial capacity, reduce inventory, de-leverage, decrease costs from enterprises and improve the vulnerable spot. On fiscal side, need to reinforce implement tax reduction policy; gradual increase deficit rate. On state-owned enterprise reform side, need to promote the state-owned enterprise reform, accelerate restructuring government capital investment and operating enterprises; accelerate promoting monopolized industry reform. Overall, there are lots bullish news which manifest determination and strength; in addition, tax reduction, reduce capacity is different from previous promote in unilateral demand side driven with RMB 4; these reforms may provide better outlook logically. From a stage, market is intertwined with economy downward and reform expectation, along with continuously releases policy and, stabilizing economy data, the bullish reform expectation lead the market sentiment; stock index is likely to further rising in the future.

Monday copper price continued rallying, ended at increased 1.55%. On fundamental side, LME spots decreased $5 to discount $5; inventory continued edged up. Shanghai copper spots were discount RMB 100 to flat but, market demand was weak and trading was thin. On supply side, International Copper Study Group indicated, September global refined copper was shortage 26,000 tons in this year, in August, this data was oversupply 77,000 tons, the tightening supply end problem had been given attentions gradually. China November refined copper import increased 12% to 359,000 tons year-on-year, concern on weakened Chinese demands got further released. Technically, we tend to consider copper price may further rallying in the future; if LME rises through $4750, next target is $4900; if domestic copper resistance is RMB 38000, we recommend continue holding long positions.
Soybean No.1 strong fluctuated in the interval; oil against meal ratio further weakened. Domestic soybean spots market overall was strong out of stabilizing but, market in north and south was restricted by its different requirement structure, soybean price in slightly divergence tendency. We regard soybean No.1605 contract will fluctuate among RMB 3640-3800/ton in a short-term, recommend selling at high and buying at low within this interval.
Soybean meal price was generally in stabilizing, partial areas and oil plants were mixed with increase and decrease; trading volume slightly increased; new opened basis was suspended and volume on closed basis slightly increased. Current nationwide oil plants maintain in high operating rate, supply hammer from raw material relieved. Oil against meal ratio dropped back to 2.33:1, tendency started to weakening. As for operation, we recommend holding arbitrage between long meal and short oil.
Yesterday PP futures opened flat and went higher; opened at 5575 and ended at 5717; trading volume increased 71810 lots to 1.597 million lots; holding increased 6426 lots to 566,000 lots. On spots side, yesterday domestic PP market price adjusted in stabilizing. Partial petrifaction regions reduced producer cost which weakened the bolster to market cost. PP futures operating in high point had boosted the market sentiment. Merchants’ sentiment improved, demand on selling in surrendered part of profits weakened and, observing on market reaction. Plants in downstream observed in cautious, receiving demand had no plainly improvement; market trading and investing momentum was thin.
Current main quoted prices for wires of north, east and south markets are RMB 6000-6150/ton, RMB 6100-6400/ton and RMB 6200-6500/ton, respectively.
As for operation, current moving average system turned in to upward trend; MACD red column extended as technically raising pattern. There is possibility on technically reviving recently.
                                                                          Dong LV (Investment Certificate NO. TZ008452)