Daily Report 010216 2016-02-02
Macro Economy
US stock market went strong on Friday, the benchmark stock index set the largest rally from five months; the prior released earnings from Microsoft was better than expected and, Bank of Japan reinforced the monetary stimulatory policy which boosted the market confidence. S&P 500 index increased 46.88 point or 2.48% to 1940.24 point. From data side, US fourth quarter GDP increased 0.7% annualized quarter on quarter, was lower than 2% in third quarter and, was lower than market expected 0.8%. San Francisco Fed president Williams indicated the Fed tightening pace might slow down compare to prior expected. We regard the slows down fourth quarter GDP growth is mostly conforms to its consistently seasonal performance and, the related manufacturing data as PMI, ISM index and value of industrial output which we mentioned previously has already showed sharply slows down. From the future perspective, US economy reviving trend is hard to have plainly growth if only depend on the real estate market; slowly reviving is the most probable situation.
From Europe side, Euro Zone January consumption price increased 0.4% after compromised, set the largest increase since October 2014, which might give a short relief to ECB. But since the high cardinal utility of the second quarter energy price, the inflation index might weaken again, we regard ECB would meet commitment on extending easing. Last Friday Bank of Japan announced would introduce three tiers interest rate system, implement positive interest rate, zero interest rate and negative interest rate on different banking deposits. After Japan introduced implementing negative rate, US and Euro stock market soared on Friday and, Japanese Yen against US dollar set the largest decrease range from one year. Harihiko Koruda indicated implementing negative interest rate was not aim at the exchange rate but to reach the 2% inflation target quickly, and would further lower the negative interest rate if necessary. This unexpected policy might bolster the US dollar index, and trigger the concern on monetary war again. The two perspectives are against with the RMB stabilization, we will continue focusing on it. In addition, National Bureau of Statistics of China will release January manufacturing industry PMI at 9 o’clock intraday morning, expected is 49.6 and is lower than 50 for the sixth straight month; meanwhile Caixin manufacturing industry PMI will be released, expected to lower than 50 for the eleventh straight month. This data need to be focused.

Stock Index
Last Friday spots index soared 3%, blue chips all rallied. The reason on rally is because of has over decreased, bearish momentum is thick and need digest; too low is bullish, the potential bailout and other bullish will be imagined by investors. Though the evaluation on CSI 500 was low, facing the banking spreads became effective, intensified competition, potential bad debt was inestimable, and the price would not rally. And overall trading was still at low level, the upward trend hadn’t rallied over five-day moving average system, late market dropped back, the continuously momentum was not huge in the future. From bigger perspective, reform, national team bailout, supply side reform was all not constituted the condition to rally; economy condition was plainly in the downward trend. Securities trading settlement funds dropped over RMB 2 trillion and, three stock market crash, the retail investors thoroughly lost the confidence. Overall, index will still weaken after rally in the future.
Last Friday copper market trading and investing was thin, copper price consolidated in high. LME premium decreased $0.75 to premium $9 on last Friday, domestic discount extended to RMB 220-140; last week three main exchanges copper inventory increased to 20454 tons, including LME increased 3125 tons, SHFE increased 17653 ton. On fundamental side, Freeport hasn’t reached postpone agreement on export license with Indonesia government, shipment from Grasberg copper mine might be halted; the total copper output in 2014 was 289,000 tons. Chile copper output in 2015 slightly increased 0.2%. China is facing the Spring Festival holiday, consumption is thin and, market is likely to continue volatile. We tend to copper price is still in the rally trend of first quarter and, seek a good buying opportunity.
DCE soybean was in weak tendency, trading pace starts to slow down before the Spring Festival; oil against meal ratio was 2.30:1. Domestic soybean market trading was thin, along with the buying and selling subject exiting the market before holidays; each merchant activity sharply decreased and, gradually entering the close situation. We regard soybean No.1605 contract will mainly in weakly fluctuation tendency.
Soybean meal market terminal concentrated stocking up was coming to an end, spots price was strong out of stabilizing; market was coming into the holiday pattern, oil plant will back to operate at the seventh and eighth day of the of the first lunar month. Quotation from oil plants at port was mostly at RMB 2600-2650/ton; Oil against meal ratio was in strong tendency out of fluctuation. As for operation, we recommend holding soybean in bear or holding arbitrage between long oil and short meal at the last week before holidays.
Last week PP futures went up in volatile. On upstream side, FOB Korea propylene average price was $570.5/ton. On production side, current operating ratio was 86.8%, decreased from prior week. On spots side, last week PP market price edged up, Petro China, Sinopec increased producer price which bolster the producer cost; downstream plants appropriately covering at beginning of the week and, stock the operating supply after Spring Festival; covering gradually decreased approaching weekend, price adjusted within the interval.
Current main quoted prices for wires of north, east and south markets are RMB 6300-6350/ton, RMB 6350-6500/ton and RMB 6600-6700/ton, respectively.
As for operation, current moving average system gradually formed bullish; MACD red column shorted and, price continuously ended as cross star and negative line, as lacked of upward momentum pattern.
                                                                            Dong LV (Investment Certificate NO. TZ008452)