Daily Report 190216 2016-02-19
Macro Economy
US stock market ended the third straight raise; prior rose banking, science and technology, consumer sector calmed down; S&P 500 index dropped 8.99 point or 0.47% to 1917.83 point. US last week initial jobless claim unexpected decreased 7000 to 262,000 and, set a three month low point; variation on the labor market was not plain. San Francisco Fed Williams indicates economy still need gentle assistance from Fed policy and, prefers the gradually rate hiking path; probability of US need the negative interest rate is low; this speech basically stands a neutral attitude. From Europe side, ECB 21 January policy meeting minutes shows the decision makers’ concern on the economy outlook increase, and at least one decision maker regards it is logically for the inflation rate exceeds central bank target in a limited time, after which hasn’t reached the target over nearly three year. The meeting minutes shows further actions are likely to be taken in March; Euro against US dollar slightly soars than falls back after releasing meeting minutes and, shows a downward trend in the whole day.
From domestic side, yesterday released data showed China January CPI increased 1.8% year-on-year, 0.5% month-on-month. PPI decreased 5.3% year-on-year, decreased 0.5% month-on-month. We regard from a short term inflation will get relief, combines with prior M2 and other data, possibility of midterm inflation goes high has increased; scope on domestic monetary policy is narrowing. Central bank data shows end of January central bank caliber funds outstanding for foreign exchange decreased RMB 644.5 billion to RMB 24.2 trillion, this data is basically consistent with January foreign reserve decreases $99.4 billion. February RMB shows plainly appreciation under the US dollar weakens; foreign reserve or funds outstanding for foreign exchange is expects to narrow. In addition, PBOC Thursday announcement indicates decides to continue prior relevant arrangement on increasing the open market operation frequency, from now on, according to the demand from monetary policy regulation, in principle, launches open market operation in every working day; this means central bank will accelerated build the interest tunnel regulation under a new monetary policy.
Stock Index
Yesterday stock index dropped out of fluctuation, concept sector was as well in the flat performance and lacked of upward motivation after the continuously rally. There is no leading sector no matter the industry sector or concept sector, continuously upward trend need a plainly rotational logical. These days rally was since the senior level’s position: prime minister indicated would decisively take actions if the economy dropped out the reasonable interval; the eight ministries untied issued finance shall support the real economy; Zhou Xiaochuan indicated on the interest rate and would against with the speculation momentum; social financing data largely exceeded expectation which dragged the market expectation to stabilizing growth. Local government bond volume increased and would as well drag the expectation on stabilizing growth. But the keynote in this year and next year is the supply side reform, stabilizing growth maybe effect at the moment which would not trigger another leverage increase. In addition, January social financing data is always exceeding the expectation under each factor, effect is insufficient. Technically, IC has already revived to the hammer point which before the slump in the end of January; IF as well near to the pressure point, hammer in the future is huge. Overall, the revive trend is because of the temporarily optimism mindset and, the long term boost hasn’t shown yet. But the short term downward trend is limited, we recommend operating in fluctuation.
Thursday copper price narrowly fluctuated and, market was lacked of direction. OECD decreases the global economy growth forecast in 2016 from 3.3% in last year to 3.0% and, meanwhile, urges each countries’ leadership to release a comprehensively “urgency” policy. Saudi indicated would not reduce output which hammer the crude oil price; chaos from macro and surrounded market hasn’t ended yet. From copper market, LME spots premium edged up $0.75 to $0.25; inventory slightly increased 75 tons. Domestic spots were still discount RMB 290 to discount RMB 200; market supply was sufficient. From supply side, Vale copper output in the fourth quarter of 2015 increased 6.7% to 113,000 tons year-on-year. There was a large number of producers and smelting plants announced to cut production in the end of last year and, how was it effected in the beginning of the year was still the market focus. As a whole, copper price is still in the first quarter reviving trend, we wait for a clarified consumption side.

Soybean overall tendency after the holidays was weak, divergence showed between each contracts; soybean No.1 contract volatile weakly; oil against meal ratio met resist at 2.435 temporally. Northeast area soybean market was still in the sluggish momentum; though most trading entities hadn’t entered the market after the Spring Festival, the scattered quotation was still in the weak trend; overall price core was dropping, hence, soybean No.1 contract futures weak tendency was predicted hard to change.
On soybean meal side, oil plants at coastal region gradually started operating, the low point soybean meal spots and basis trading volume had slightly increased, market observe momentum was plainly. The Spring Festival made soybean inventory at port increased but, February port arrival hammer was not huge, port soybean quotation increased compare to before holidays. As for operation: soybean No.1 contract adjusted in low and, we recommend holding light in shorts; arbitrage between oil and meal can regard to stop profit at 2.4:1.
Yesterday PP futures continued fluctuated, opened at 6212 and ended at 6243; trading volume decreased 156,000 lots to 1.046 million lots; holding decreased 13272 lots to 611,000 lots. On spots side, yesterday domestic PP market price quoted low; most wires transaction price edged down RMB 50-100/ton. Though futures rose, Sinopec east china and other enterprises reduced producer price; Petro China partial areas implement lot sizing policy which weakened the bolster to supply cost, market quoted low. Plants in downstream purchase activity was flat, trading was scant.
Current main quoted prices for wires of north, east and south markets are RMB 6150-6350/ton, RMB 6200-6400/ton and RMB 6500-6700/ton, respectively.
As for operation, current moving average system turned; MACD dead cross was about to formed; lacked of upward momentum. Recent volatile retracement might continue.  

                                                              Dong LV (Investment Certificate NO. TZ008452)