Daily Report 030216 2016-02-03
Macro Economy
US stock market benchmark index slumps; under the condition of concern on global weak economy exacerbates, investors evade the global risk asset and, oil price continues dropping. S&P 500 index dropped 36.35 point or 1.87% to 1903.03 point. US oil dropped over 5%. Kansas Fed president George indicated the US economy was strong enough and, should insist the gradual rate hiking strategy. He indicated though the global economy situation remained suspicious, the US economy “seems to be strong enough to bolster positive growth”, unless showed significant changes, FOMC should insist the gradual interest rate hike policy. George, a voting member on the Fed's policymaking committee, always stands for hawkish and, standpoint in this speech basically has no change.
On Euro side, Euro Zone December unemployment rate decreased from 10.5% in November to 10.4% which set a four year low. But internal economy of Euro Zone critically divisive, German January unemployment has down to record low at 6.2% was 4% lower than the overall Euro Zone data; combine with prior information, Euro Zone has momentum on further easing.
On domestic side, PBOC decreased the down-payment ratio of first home mortgage from 25% to 20% on the cities without buying restriction and, adjust the down-payment ratio of second home mortgage from 40% to no lower than 30%. Currently, only the four first-tier cities, Beijing, Shanghai, Guangzhou and Shenzhen, along with the tourist city Sanya still execute the buying restriction; inventories in the second-tier cities was extremely high, even decrease the down-payment boosted the real estate sales, it had limited effecting on driving the real estate construction; the long term downward trend hadn’t change yet, a stabilizing investment can only be a short term phenomenon, help on the market would only reflected in psychology and anticipated function. In addition, paying attention on the January Caixin service industry PMI will be released intraday and, December initial value is 50.2.
Thursday copper price dropped after soaring. Since short covering before the Spring Festival, copper price once closes to $4628 high point but, concerns on the Chinese economy again control the copper market sentiment. In addition, since OPEC is not likely to decrease output, crude oil price again drops below $30 yesterday; Europe and US stock market is also in bad performance; hammer on the copper market still exists. On copper side, LME spots premium decreased $5.5 to $5.5; inventory continued decreasing 375 tons. Shanghai copper spots discount narrowed RMB 25 to discount RMB 210-120; holding merchants gradually showed price support and reluctant to sell out by the end of the year; intraday trading and investing was still circulating among the merchants, downstream enterprises market entering volume decreased day by day, demand turned to thin and trading volume decreased. On supply and demand side, Glencore subordinated Chilean Lomas Bayas copper workers protested, some workers blocked the road, and this copper output in 2014 was 67,000 tons. On terminal demand side, real estate market de-stocking ushered new policy, down-payment ratio of cities without buying restriction lowest down to 20%, demand of copper terminal was expected to have certain relief taken this opportunity. Technically, copper price was in the adjustment trend, we wait for buying opportunity after finishing adjustment.
DCE soybean is in weak tendency, trading pace starts to slow down before the Spring Festival; oil against meal ratio is 2.306:1, short tendency tend to hovering at 2.30:1. Domestic soybean market trading enters the final countdown, since most market entity is gradually leaving the market near the Spring Festival, the remains practitioners are all stocking up in observation which impact the market. We regard soybean No.1605 contract will mainly in weakness out of fluctuation before and after the Spring Festival.
Soybean meal spots quotation was strong out of stabilization, most areas spots support the price and, trading was quite thin; most feeding enterprises and merchant finished stocking up; oil plant will back to operation at the seventh and eighth day of the of the first lunar month. Quotation of oil plant at port was mostly at RMB 2600-2650/ton. As for holdings before holidays, we recommend holding soybean in bear or holding arbitrage between long oil and short meal.

Yesterday PP futures opened low and went high; opened at 6096 and ended at 6189; trading volume increased 241,000 lots to 1.337 million lots; holding decreased 3448 lots to 649,000 lots. On spots side, domestic PP market tendency was overall stabilizing, price volatile at RMB 50/ton. Though most petrifaction producer price continued increasing which enhanced the bolster to producer cost, the plants in downstream gradual took holidays, merchant shipping was poor; quotation limited to follow the rally trend. Most covering of plants in downstream was finished, purchasing was mostly stagnated, and marketing trading continued decreasing; trading and investing momentum was thin.
Current main quoted prices for wires of north, east and south markets are RMB 6250-6350/ton, RMB 6350-6450/ton and RMB 6550-6750/ton, respectively.
As for operation, current moving average system mainly formed in bull; MACD exposure upward extended as bullish tendency. But closing the Spring Festival, plants in downstream were taking holiday and, price was hard to have fluctuation, predicted would continue volatile before Spring Festival.
                                                              Dong LV (Investment Certificate NO. TZ008452)