Daily Report 120116 2016-01-12
Macro Economy
Yesterday US stock market rallied in the last thirty minutes and ended a volatile trading day, raised consumption and technology stocks offset the concern on China. S&P 500 index edged up 1.64 point or 0.09% to 1923.67 point, market was once down to 1901 point. On US side, Atlanta Fed President Dennis Lockhart indicated that he advocated continued to tighten monetary policy in this year, collapse global stock market was unlikely to impact the US economy. He tended to hike interest rate in the later meeting after the FOMC in January. In addition, yesterday crude oil dropped again, US oil WTI dominant contract dropped 5.32%, closed at $31.13. Since crude oil started to stabilize after dropped over $50 from last January, its highest price had rose to near $60, hence, the price started to drop again in the end of 2015 which was probably because of high base made crude oil year-on-year revive data slowed down. On the current situation, Goldman Sachs, Morgan Stanly and other institutions has estimated oil price might down to $20, if current situation continued crude oil price in this April might become the lowest price year-on-year and thus the US inflation rally trend would be blocked, produced unfavorable effects on Fed interest rate hike decision. Pay attention on US inflation level and Fed’s comment on inflation situation to estimate the possibility on interest rate hike, we regard possibility on interest hike in March is small; from market perspective, Fed funds futures shows probability on keeping current interest is 52.6% and, higher than probability on interest hike.
On China side, Ma Jun, chief economist of central bank's research bureau indicated during the interview from Xinhua News Agency and other media, current formation mechanism on RMB exchange rate was neither dollar-pegged nor entirely free float; enhanced the force on reference to basket of currencies can stabilized the exchange rate on basket of currencies, was the basic theme on visible RMB exchange formation mechanism in the future. In addition, yesterday onshore RMB against US dollar night session rallied for the first time in four days, 23:30 at Monday Beijing time, onshore RMB against US dollar was 6.5695 yuan, increased 0.37% compare to the end of last night session. Offshore RMB soared 1.48% and once reached 6.5842; HIBOR soared, market conjecture on central bank intervened currency market had been verified from Han Jun. Central bank intervened currency market was conformed with our expectation, RMB exchange rate continuously downward trend would relieved for a short time. We recommend paying attention on US policy in the future, once interest rate hike expects to postpone, we do not exclude possibility on RMB exchange rate periodicity stabilizing or reviving.
Monday copper market was weak, LME copper price effectively dropped over prior low point $4443 and ended at $4384 with 2% down. Domestic copper price as well dropped to near RMB 35000 with fluctuation. Monday crude oil price again slumped 4.67% hammered other commodities. Monday China stock market collapsed but, on foreign exchange market, PBOC intervened exchange market, offshore RMB exchange rate soared 1.41%; recent collapse on both Chinese exchange market and stock market made market concerned on Chinese economy, after stabilized Chinese exchange market, stock market stabilization would become the focus. A high official from China Financial indicated Chinese economy would growth at L form in a long term, President Xi indicated would strive to build main body framework on reform within this year, tried to practice each reforms. Back to copper market, LME spots again dropped $6.25 to discount $8.75, inventory increased 1975 tons. Shanghai copper spots discount extended RMB 15 at discount RMB 250 to discount RMB 150; import copper supply continued rising, downstream mainly stayed in observing; domestic consumption before Spring Festival was in slack season. Copper union of BHP subordinated Chile Cerro Colorado indicated after failed to negotiate salary contract, the mine workers would go on strike on Monday; the output of this mine in 2016 fiscal year was predicted at 250,000 tons. Glencore subordinated US Sherwin filed for bankruptcy which increased the panic on nonferrous market. Technically, copper price was still weak, we recommend waiting for the sufficiently release on copper price downward momentum.

DCE soybean bilateral fluctuated in the night session, overall tendency was weakened; oil against meal ratio showed sign to periodicity bottom out. No plainly variation on domestic soybean futures and spots side, current domestic soybean export price tendency in Heilongjiang and partial Inner Mongolia was weakened; market buying and selling momentum was stagnant, weakness plainly showed. We regard soybean No.1605 contract short term rhythm was uncertain, the entire tendency before Spring Festival would mainly in weakly fluctuation, stay on observing as for operation.
Soybean meal market retraced and spots price was steady; feeding enterprise stocked up before Spring Festival made oil plants support the price; the revived soybean meal pattern would be ended along with the closure of stock up. Oil against meal ratio dropped to the lower edge of recent volatile range, we recommended pay attention on the bolster at fluctuation lower edge in a short term. As for operation, we recommend arbitrage between long meal and short oil stop profit or reduce holdings.
Yesterday PP futures fluctuated in low point, opened at 5624 and ended at 5633; trading increased 487,000 lots to 1.809 million lots; holding decreased 5134 lots to 541,000 lots. On spots side, yesterday domestic PP market continued dropping, overall price dropped RMB 100/ton. Producer price in partial Sinopec east china, south china and, Petro China southwest, south china areas continued decreasing which weakened the bolster to supply cost.
Current main quoted prices for wires of north, east and south markets are RMB 6000-6100/ton, RMB 6100-6300/ton and RMB 6350-6850/ton, respectively.
As for operation, current moving average system twisted; MACD red column shortened and about to form dead cross as weak trend. We estimate would continue weakly fluctuation recently.
                                                                        Dong LV (Investment Certificate NO. TZ008452)