Daily Report 010316 2016-03-01
Macro Economy
US stock market dropped in yesterday; S&P 500 index dropped 15.82 point or 0.81% to 1932.23 point, from monthly line, excepted for its growth in February, it had ended low for three months. Euro Zone February CPI initial value decreased 0.2% year-on-year and, expected to level off. Core CPI increased 0.7% year-on-year which was lower the expected 1% growth. This emergency had exacerbated the hammer on ECB enhancing monetary stimulation in the next week. Currently, in the earlier stage Draghi and ECB officers had already declared might enhanced the easing force, with the addition of prior bearish data, it was almost certain for the ECB management committee meeting extended easing. From concrete measure, the possibility on interest rate further hiking is extremely huge; another focus is on whether the policy on strengthening QE can be released. Euro exchange rate still faced the risk under the hammer.
From domestic side, the People's Bank of China said in a statement at 6PM yesterday that the reserve requirement ratio will be cut by 50 basis points for all financial institutions beginning on 1 March. This reserve reduction is almost completely exceeded market expectation, is equivalent to release about RMB 700 billion liquidity; partial reason is a reaction on the January and February capital outflow. The central bank again used the traditional monetary policy tool after four months and, clearly released the signal on easing which implied priority of accelerating economic growth was higher than the RMB exchange rate. From market perspective, RMB offshore exchange rate jumped after the news released and broke through 6.55. In current circumstance, the weakens Euro will push the US dollar stronger; central bank reduces reserve at this moment is likely to bring more hammers on the short term RMB stabilization; we recommend focusing on the stabilizing exchange rate policy central bank might taken. In addition, National Bureau of Statistics of China will release February manufacturing PMI at intraday 9 am, and the February data is expected to stay in low level since the influence of Spring Festival, market expectation is 49.4, level off with the three year low point in January and, is lower than the 50 threshold for the seventh straight month, this data need to be focused.
 
 
Stock Index
Yesterday stock index continued slumping which showed the sign on stock market crash 3.0 might continue. The market was still in panic, GEM sector dropped 6%; index revived in the end of market which was estimated relate to central bank reduce the reserve, meaning this news might already had a certain reaction on the market. We regard the central bank reduce reserve is for coordinating with real estate market de-stocking. Tendency might continue weakening out of the fluctuation, firstly, there is no sign shows economy is improving, and enterprises are hard to have profits, demand side stabilizing growth under the stimulation by real estate is unable to persistent. Secondly, from the repeatedly collapse in last year, the investors are seem to become easy to get frightened, once there is any rumors after rallying, they will have a large scale of panic. Overall, index is hard to rally back and will weaken in the fluctuation.
 
 
Copper
Monday copper price got bolster after soaring than fell back in the last week; central bank accidental announced to cut 50 basis points which provided momentum to the market. On the copper market, LME spots premium increases $1.75 to $10.5, inventory continued decreasing 1600 tons. Domestic spots discount narrowed RMB 10 at RMB 190 to discount RMB 120. Latest news, Chile January copper output decreased 13.8% year-on-year, the lower copper price decreased expenditure from mine merchants, expected Chile copper output in 2016 would continue stabilizing. Zambia copper output would as well keep at 700,000 tons. Mine merchants reduced output at the beginning of the year had lower the process cost under $80; in addition, China smelting plant are delivering the reserves which all became the bolster factors to copper price. Technically, copper price is at the key resistance; whether price can rise over this point will determine if the copper price rally scope can be opened. LME is $4730 and domestic is RMB 36700.
 
 
Soybean
DCE soybean was in fluctuation and volatile with the overseas market; oil against meal ratio was 2.463:1, reached the short term target. Northeast area soybean price is still in downward trend, Heilongjiang north, middle and south part soybean export price showed down range at RMB 20-40/ton; market trading was sluggish and pessimism sentiment was thick, short term weak trend was hard to change.
On soybean meal side, soybean meal spots quotation all dropped intraday; spots and basis trading was thin. Domestic oil plant operation rate is in the normal level and, import soybean supply is sufficient; breeding stock on pig and other breeding market is low which is unable to drive the purchase demand on breeding enterprises. Forward soybean meal process costs continue dropping; US soybean is weakening which exacerbates the market bearish sentiment; domestic soybean meal market is likely to continue passivity followed the downward trend. As for operation: soybean No.1 take reference at 3400-3600; arbitrage between oil and meal pay attention to stop profit at 2.45:1.
 

PP
Yesterday PP futures continued volatile, opened at 6588 and ended at 6548; trading volume decreased 228,000 lots to 1.791 million lots; holding decreased 47304 lots to 616,000 lots. On spots side, yesterday domestic PP market tendency is in stabilizing, partial area price edges up RMB 50/ton. Partial petrifaction price slightly increases at the beginning of the month which increases the bolster to supply cost and, the boost from futures opens high earlier, the practitioners’ sentiment improves, merchants shipping enthusiasm decreases. Plants in downstream continue purchasing as demand and, real market stock up volume is limited; the entire market trading following is limited, trading and investing momentum is thin.
Current main quoted prices for wires of north, east and south markets are RMB 6150-6250/ton, RMB 6400-6500/ton and RMB 6450-6550/ton, respectively.
As for operation, current moving average system arranges in long but, MACD red column shortens, upward momentum weakens; recent tendency is expected to continue fluctuating.
 
 
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