Daily Report 260116 2016-01-26
Macro Economy
US stock market dropped under the impact from slumped oil price; energy sectors set the largest downturn from eight months. S&P 500 index dropped 29.82 point or 1.56% to 1877.08 point. On US side, FOMC will convene a two-day policy meeting on Tuesday, market expects Fed will bide its time during this meeting; federal funds rate futures shows the possibility on interest rate hike in January is only 10.7% and, in March is 29%, is in the relatively low level. We regard the initial interest rate hike will be in June and, there will at most one-time rate hike in the first half year; we predict there will be dovish shows in this statement. On Europe side, ECB president Draghi spoke of the QE project released in last year, indicated the result of QE was remarkable. Draghi as well indicated ECB must reach the inflation target which was important to the ECB’s reputation. Last week Draghi implied ECB might introduce further stimulatory measures in March to against the economy downward risk; Euro might continue under hammer in the future.
 
 
Stock Index
Yesterday stock index narrowly fluctuated and came into the volatile period at present; the bearish panic selling was temporally come to an end. On news side: Li Keqiang indicated to accelerate financial and taxation system structural reform by changing the business tax into value added tax, to stimulate the market's vitality and, arouse the two enthusiasms. Along with the weakening economy and, index volatile low, there are some bullish and reform news coming. But the risk to weaken was still huge after the upward adjustment. Reason on: firstly, market’s confidence on reform boosts the stock market to bullish has decreased; the reform bullish is unable to raise the index in a short term. Secondly, the bailout from national team is repeatedly effecting in 2015 and, its maximum effect has already past; CSRC starts to emphasize the risk from A Share and valuation problem currently, instead of the strong bolster attitude. As a matter of fact, administrative power is incapable to against the tendency.  Thirdly, the supply side reform is likely to boost after bust, the unemployment or some recessive unemployment of the traditional industries may shatter the economy; chances on raised enterprise profit to push the index is small. We estimate short term tendency will in upward adjustment, medium term will in volatile weaken.

 
Copper
Monday copper price edged down, crude oil market collapsed again hammered the market. Since Iraq announced its oil production had reached a record high, US crude oil price slumped below $30. The panic sentiment from crude oil market swiftly expressed overall the financial market, yesterday Euro and US stock market was nearly overall collapsed. VIX index increased back to 24.15 and was higher than regularly 20. The battle on crude oil shares was hard to solve in a short term and this would be a bearish factor to the market. Back to copper market, LME spots premium decreased $4.25 to $2; inventory turned to increase 1475 tons. Shanghai copper spots discount narrowed RMB 5 to discount RMB 220-120; market trading was mainly on exchange goods and replenishment between the large merchants, low level trading was gradually improving. Overall, the Spring Festival is approaching, domestic consumption is gradually thinning, the financial market is under fluctuation, and copper price is likely to fall in a short term. We recommend temporally staying in observing on operation and, waiting for the buying opportunity after copper price finishes adjustment.
 
 
Soybean
DCE soybean has varies performance, soybean No.1 ended down in the night session; oil against meal went stronger, ratio at 2.297:1. Soybean price in main producing areas was overall stabilizing; Heilongjiang 4.0 cleaned grain purchase price was RMB 3680-3800/ton; quotation of partial areas slightly decreased. Along with the amount of grain area stopped receiving was increasing, market buying and selling momentum was even thinner. We regard soybean No.1605 contract is hard to have unilateral tendency before and after the Spring Festival. Domestic soybean meal spots price slightly decreased in partial areas, current domestic oil plants operating ratio was high, soybean supply was relatively sufficient.  Concentrated stock up before Spring Festival is continuing, trading in boost which bolsters the price; quotation of oil plants mostly among RMB 2600-2650/ton. Oil against meal ratio goes strong, pay attention on its persistence in a short term. As for operation, we recommend arbitrage between long oil and short meal try to enter.

 
PP
Yesterday PP futures continued fluctuating, opened at 6010 and ended at 5992; trading volume decreased 535,000 lots to 1.204 million lots; holding increased 1094 lots to 664,000 lots. On spots side, yesterday domestic PP market price was mostly in consolidation, partial market raised RMB 50-100/ton. PetroChina northeast and south china increased producer price which weakened the bolster to market cost. Merchant’s demand on price concession decreased and partial merchants were reluctant to sell out. At the end of the year, downstream plants stock up intention decreased, market trading was in common.
Current main quoted prices for wires of north, east and south markets are RMB 6150-6300/ton, RMB 6250-6450/ton and RMB 6400-6600/ton, respectively.
As for operation, current moving average system twisted; MACD red column extended as stabilizing pattern. We recommend paying attention on the performance at 6000.
 
 
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