Daily Report 070116 2016-01-07
Macro Economy
Yesterday US stock market slumped; Yuan devaluation caused concern on global economy growth. S&P 500 index dropped 26.45 point or 1.31% to 1990.266 point as a three-month low point and, down through 2000 mark. US and Europe Wednesday economy data showed ADP US enterprise December employment increased 257,000, was higher than expected 198,000 and set the largest growth since December 2014, indicated Friday non-agriculture employment data might be strong. December ISM non-manufacturing index was 55.3, there was not much left overstocked orders need suppliers to handle, which drive the delivery sub-index dived and, set a record low from April 2014. November trade deficit narrowed 5% to $42.4 billion, import decreased 1.7% and export decreased 0.9%. November factory order decreased 0.2% compare to October. Markit Euro Zone December composite PMI unexpected rose from 54.2 in November to 54.3, indicated last fourth quarter growth had reached the fastest speed in four and half years. Overall, above data still showed US economy reviving trend had no changes, Fed December FOMC meeting minutes revealed almost all committee members consider the condition on interest rate hike was matured. But during Fed interest rate hike, partial officers indicated the concerns on inflation, strong US dollar and overseas economy, that interest rate hike in December was not necessary. Fed vice president Fischer made speech on Wednesday that, the financial market was “too low” on expectations of future rate hike; he considered fourth interest rate hike in 2016 was “in the ballpark”. From current Fed interest rate futures prediction, possibility of twice rate hikes in year 2016 was the highest, indicated twice rate hikes was market general expectation. But indicated from last December Fed officers’ lattice diagram on interest forecast and recent speeches from several officers, Fed was inclined to guide market expectation shifted to fourth rate hikes, following officers’ attitude and condition on Fed meeting need to be focused. In addition, yesterday North Korea experimented hydrogen bomb which cautioned market sentiment, KRW exchange rate dropped to recent low point and, New York gold price rallied to $1093.3. Along with factors in Asia areas especially Chinese Lunar New Year was approaching, gold price might rally in a short-term.
Intraday PBoC would release foreign exchange reserves data in the end of December, expected was $3.415 trillion, lower than $3.438 trillion in the end of November. But under the circumstance of RMB continuously devaluating, weakened central bank intervention, decrease range was expected to narrow, this data need to be focused.
 
 
Stock Index
Yesterday stock index soared, Shenwan first grade industries all rallied; steel, coal and other surplus industries boosted, steel sector surged 7.35%, mining soared 6.6%. After market slumped, bottom fisher was stimulated by de-capacity in the supply side reform. But supply side reform was not new to market, yesterday tendency was a reaction combined with oversold. From long-term perspective, supply side reform, tax reduction and state-owned enterprise reform need time to be effective. Under the circumstance of de-capacity, factors on next year market boost was predicted hard to come from increased enterprise profit. Recent offshore RMB sharply devaluated indicated the capital preference on domestic asset was getting worse. Though index increase scope was large, in consideration of enterprise profit was hard to rise, the worst time of economy hadn’t past; prior market expectation on reform was sufficient, hence the downward trend hadn’t finished yet and cannot rally back.
 
 
Copper
Wednesday copper price still fluctuated within the interval and got bolster at the downside. Bolster on Chinese copper price was still strong comparatively speaking, this was related to RMB devaluation and, news on China purchase reserve as well bolstered the copper price. Wednesday global financial market was still in panic, crude oil price slumped 5%, Europe and US stock market dropped; RMB continuously devaluation worse the concern on Chinese economy hard landing; gold and Japanese yen became a hedge. But most commodities’ price showed strong resistance to downturn which was related to plunged price in last fourth quarter; output reduction and weakened consumption failed to meet expectation was as well the main reason. World Bank decreased 2016 global economy growth expectation to 2.9% but, still higher than 2.4% in 2015, China’s risk in 2016 has become the largest focus of market. In consideration of China will solve the problem on both supply and demand side, nine provinces has released projects valued RMB 14 trillion in the beginning of the year and, there was already lots major projects has been concentrated constructed at present, China’s risk elimination was still under procedure. Zambia copper output in 2015 decreased from 710,000 tons in 2014 to 600,000 tons, target in 2016 was 700,000 tons. But current problems on insufficient electric power supply still existed; latest news, the first quantum subordinates Sentinel output failed to meet the expectation and, was reducing the workforce at present.
Technically, copper price is still in upward trend; domestic March copper bolster is RMB 35700, LME is $4550.
 
 
Soybean
DCE soybean rallied in the night session, oil against meal ratio further dropped. Domestic soybean spots slightly weakened, price in Inner Mongolia and partial Heilongjiang areas continued dropping. We regard soybean No.1605 contract short term direction is uncertain, the entire tendency before Spring Festival will mainly weakly fluctuated. We recommend staying observing as for operation. Domestic soybean meal is stabilizing, current nationwide mainstream oil plant soybean meal inventory rose compare to last week, oil plant inventory in partial area is under huge hammer and is forced to halt; operation rate sharply decreases compare to before New Year. RMB continues devaluating boosts soybean import cost and, bolsters oil plant price support sentiment. Oil against meal ratio is 2.38:1; short term tendency tends to fall back. On operation, we recommend arbitrage between long oil and short meal may stop profit and close positions or, reverse operate in light holdings.
 
 
Natural Rubber
Yesterday Shanghai rubber weakly fluctuated, US dollar spots market quotation dropped: domestic spots price 1070-1080 (-10); domestic cargo price 1090-1110 (-10); US dollar RSS spots price 1170-1200 (-10); US dollar RSS cargo price 1160-1210 (-20). On news side: global risk aversion still hanging over the market, though domestic stock market rallied at yesterday, offshore yuan slumped again, overnight Brent oil plunged 6%. Overall: though the entire financial market risk appetite is come from stock market downturn and, other negative information as RMB devaluation, weakened PMI, the risk release in commodity market at the first trading day of this year was plainly earlier than stock market; we regarded it was mainly come from the risk release after prior out of fundamental rally, representative by recent strong non-ferrous and ferrous rubber. From rubber side, spread swiftly returned, most front month non-firm offers evacuated and, forward month premium again. Market might seek new hotspot on limited downward out of fluctuation; we recommend focus on prior concentrated trading area technically.
 

PP
Yesterday PP futures opened low and went lower, opened at 5760 and ended at 5726; trading volume increased 59020 lots to 1.779 million lots; holding increased 58022 lots to 631,000 lots. On spots side, yesterday domestic PP market price was mainly stabilized, partial market price loosed. Part petrifaction reduced producer price which weakened the bolster to market cost. PP futures soared then fell back, shattered market sentiment. Merchants mainly shipped following market trend, partial merchant slightly surrendered profit in actual market for increase shipment. Downstream plants purchased as own demand, market trading was thin.
Intraday main quoted prices for wires of north, east and south markets are RMB 6250-6300/ton, RMB 6350-6600/ton and RMB 6650-7100/ton, respectively.
As for operation, current moving average system mixed, MACD red column shorted as resisted upward trend; price might retraced recently, we recommend observing.
 
 
                                                                 Dong LV (Investment Certificate NO. TZ008452)