Daily Report 160216 2016-02-16
Macro Economy
Yesterday US financial market was closed for the holiday. On Europe side, ECB president Draghi indicated if the volatile economy or the imported inflation threatened Euro Zone price stability, central bank would take decisive actions; the decrease level and persistence from crude oil and commodity price, and its impact to Euro Zone was the decisive factor. Meanwhile Bundesbank indicated the first quarter economy growth was expected faster than last year, consumption was benefited from slumped oil price, enhanced household purchasing power. The relatively dovish attitude from ECB made Euro rapidly dropped afterwards but, it gradually gained the lost profits to 8 o’clock in the morning; the next market focus was March ECB management committee meeting. In addition, European Council president Tusk indicated negotiation of European Union and Britain was very vulnerable, risk of break down actual existed. According to the poll result, 49% British approve of stay in European Council and, 41% approve of exit which showed the referendum in the middle of the year was full of suspense.
On domestic side, yesterday released data showed the January export denominated in dollar was negative grow 11.2% year-on-year, import negative grow 18.8% year-on-year, and trade surplus was $ 63.287 billion. The RMB denominated export and import slipped 6.6% and 14.4%, respectively. To put this in perspective, export to US, Europe and Japan respectively dropped 9.9%, 12.04% and 6%; export to India, Brazil, Russia and South Africa dropped 4.31%, 44.36%, 4.27% and 34.7%, respectively; export to Hongkong, Taiwan, Korea and ASEAN dropped 2.79%, 10.99%, 16.02% and 17.97%, respectively. Labor intensive products, high-tech and mechanical and electrical products dropped 6.32% and 11.14%, respectively. Overall, seasonal factor is the main reason on this data slump; from export, import and trade balance side, impact from RMB devaluation was not huge, historical recessionary surplus has certain positive impact on stabilizing the exchange rate; offshore RMB may continue at 6.5.
Stock Index
Yesterday stock index opened low and went high, nonferrous sector raised 3.8%; small cap stock was slightly stronger; concept stock gold, jewelry index soared 6%. Resent released export data was lower than expectation but, had slightly impact to the market; reality was in the low point and was slow to respond to the weak economy data. RMB offshore soared near 700 points during the holiday, exchange rate soared 1.14% which was related to Zhou Xiaochuan emphasized there was no basis for RMB devaluation and, would against with the speculation. Meanwhile January foreign reserves decreased $99.4 billion which was lower than expectation; the rallied exchange rate was the revise to expectation. Collapse and devaluated exchange rate since 2016 (reflected self-distrust to economy) was high correlated, hence even if the overseas stock market dropped, the stabilized RMB rate would bolster the stock market. In consideration of A Share has already rallies in a certain range before the holiday, the index may shows fluctuation pattern. The short term bolster is at 2900.
Monday LME copper opened high and went higher but, lost nearly half profits afterwards. Domestic copper price was low volatile after dropped on Monday. Monday ECB president Draghi indicated if the fluctuation of financial market influenced the Euro Zone economy outlook, ECB would extend the stimulate policy in March; in addition, meeting from Saudi Arabia and Russia at Doha increased the expectation on crude oil producing countries would reduce output and, crude oil price soared, above factors relieved the panic sentiment. On copper side, LME spots premium increased $6.75 to $10.5, inventory continued decreasing 1925 tons. Shanghai spots were discount RMB 30 to RMB 70, increased RMB 95 compare to the price before holidays; the market joint merchants were less, overall trading was flat; domestic consumers would be back to market after the fifteenth day of the first lunar month. We tend to consider copper price is still in the first quarter rally trend, recommend observing in a short term and, seeking for a good opportunity to enter.

Soybean No.1 contract continues weak trend at the first trading day after the holidays; division pattern of strong oil and weak meal continues. Under the main impact from overseas strong oil and weak meal, domestic market is in stagnation during the Spring Festival; trading activity in the northeast area is predicted to start after the fifteenth day of the first lunar month; spots are predict to further weakening under the influence of surplus grains, short term supply pressure will be plainly relieved. But from the impact of stock up before holidays, oil and meal spots supply will not show tight situation. Operation suggestion: soybean No.1 weak trend will not change and we recommend holding light shortens; continues holding arbitrage between long oil and short meal.
Natural Rubber
Yesterday domestic commodity and stock market opened low and went high; Shanghai rubber main contract volume increased to over 10500. US dollar spots market quotation raised $20: domestic spots price are 1040-1060 (+10); domestic cargo price 1070-1080 (+10); US dollar RSS spots price 1240-1260 (+20); US dollar cargo price 1250-1260 (+20). On macro side, yesterday released Chinese foreign trade data was weak at the beginning of the year: import and export decreased 9.8% year-on-year which set a ten month new low. Including natural rubber synthetic rubber and rubber latex January import was 456,000 tons, decreased 22% month-on-month, increased 30% year-on-year. Overall: RMB exchange rate was stabilizing in a short term, domestic economy data was poor and the speech from prime minister got easing prediction back to investors’ view. Yesterday commodity opened low and went high conforms to our expectation. We predict industrial products remain strong in a short term and, medium term is hard to get rid of fluctuation pattern.
Yesterday PP futures opened low and went high, opened at 6390 and ended at 6312; trading volume increased 171,000 lots to 1.101 million lots; holding increased 33968 lots to 606,000 lots. On spots side, yesterday domestic PP market price had no huge variation and continued quotation before the holidays. Petrifaction producer price remains stabilizing and, inquiry from plants in downstream is not huge, merchants into the market following trend and, observe in cautious.
Yesterday main quoted prices for wires of north, east and south markets are RMB 6300-6450/ton, RMB 6350-6500/ton and RMB 6550-6750/ton, respectively.
As for operation, current moving average system formed in long; MACD red column shorted as retrace trend. Current domestic and overseas macro economy environment was poor, dragged the commodity price which led by crude oil, hype on crude oil had not effected yet, risk on retracement was huge. We recommend if holding long positions before the holidays may appropriately close position and observe.
                                                             Dong LV (Investment Certificate NO. TZ008452)