Daily Report 060416 2016-04-06
Macro Economy
US stock market slumped yesterday, cautious from investors to global economy exacerbated concerns on further weakening. S&P 500 index ended low at 20.96 point or 1.01% which set the largest downturn over four weeks. Hidden worry from global economy outlook increased and, led to MSCI set the largest down range over two months. Japanese Yen against US dollar rose to the highest level over the past year and a half. From news side, yesterday released data showed US February trade deficit increased to six-month-high at $47.1 billion, since the import growth was higher than export. March ISM non-manufacturing index rose from 53.4 in February to 54.5, showed the service industry accelerated to extend for the first time over five months, which indicated the economy was firmer at the end of first quarter. Chicago Fed president Evans again indicated at the meeting at yesterday afternoon, that Britain “take off the European” referendum and the US presidential election triggered uncertainty, which complicated the decision from policymakers and, enterprises, investors. Overall yesterday news side was relative calm, importance of the relevant data and speech was low, impact to the market was limited.
From Europe side, Euro Zone economy growth was slower than the initial expectation from the end of first quarter; March composite PMI down revised from initial value 53.7 to 53.1. German February plant order decreased 1.2% month-on-month, expected was 0.3% growth. Draghi indicated at the letter to the members of the European Parliament, collapse of oil price was because of oversupply from market and, the fundamental side was the crucial boosting factor; the direct influence from collapse oil price would form limited risk on Euro Zone financial stabilization. We regard all along that Europe economy – especially the sluggish inflation, except oil price, negative effects from own factors were even larger. Hence, the path to economy reviving is still in deep waters.
 
 
Stock Index
Yesterday stock index rallied; Shenwan first class sectors all line raised; growth enterprise market rose above 3%, computer and electronic sector rose in the leadership, concept on charging pile soared. Rallied index was mainly benefited by the financial boosting and, monetary easing which had already showed effects. Caixin news: Chinese initial debt-to-equity swap scale was RMB 1 trillion, the debt-to-equity swap can reduce bad debt from banks and, lots of problems can be continued prolonging, which showed bullish in a short term. In addition, there was PMI, newly operating project plans, industrial enterprises profit revive and other signals showed economy was temporally stabilizing. From reform side: after the Change from Business Tax to Value-Added Tax, VAT income might split 50-50 from central and local government; in the long term, this might help the local government gradually getting out its dependence on land finance. From external perspective, the dovish speech from Yellen created a good external environment on Chinese continuing easing and fiscal incentive. But there is no persistently leader in the market at present, only it is hard to downward adjust and, volatile might showed up in the reviving trend. We recommend operating in fluctuation in the future.

 
Copper
Wednesday domestic and overseas copper market showed strong resilient; the copper price showed strong performance under the circumstance of the unexpected dropped German industrial orders and, the slumped global stock market, which showed recent copper price was lacked of momentum after continuously dropping. Current market focuses on the production freeze meeting between crude oil countries on 17 April. On copper market side, LME spots premium edged down $1 to $17.75, inventory decreased 2050 tons. Domestic spots discount were at RMB 100-40, no plainly replenishment showed from downstream side.
From supply side, Peru February copper output soared 70% to 169,000 tons, mainly because of Cerro Verde project expanded production, its output increased from 247,000 tons of last year to 500,000 tons. CESCVO meeting: the upstream enterprises were all concentrated reducing costs, current momentum on reducing costs was thin. There have been claims that recent processing charges show strong momentum again, which shows hammer on copper supply will appear again. Technically, copper price is likely to adjust in a short term and, we recommend waiting for the new opportunity to short.
 
 
Soybean
DCE soybean retraced following overseas market in the night session; oil dropped in the lead and, oil against meal ratio dropped to 2.595:1 from high point. Domestic soybean continued weakening since the beginning of April; intraday Heilongjiang soybean price was relatively stabilized. Recent market pessimism sentiment was thick, demand subjects were hesitated to enter market since wary on price continue dropping in the future; grain merchants and enterprises purchased based on demands; soya farmers were concentrated selling grains at this period which dragged the price further lower.
From soybean meal side, spots quotation in partial areas increased; oil plants quotation were still at RMB 2380-2420/ton. Spots trading were flat, low point basis trading volume slightly increased. Pig price increased but pig breeding stock was hard to rally in a short term; aquaculture was hard to raise the demand from fodders in the near future; pattern on soybean meal oversupply hadn’t changed and, price was hard to rally and easy to fall. As for operation: fundamental on soybean No.1 contract is weak and we recommend staying in observation. Soybean meal shorting in lightly positions when price is low; arbitrage between oil and meal operates in short band ratio retracement.
 
 
PP
Yesterday PP futures continued fluctuating; opened at 7035 and ended at 6967; trading volume decreased 96632 lots to 1.632 million lots; holding increased 5096 lots to 618,000 lots. On spots side, yesterday domestic PP market edged up out of stabilization. Producer price of petrochemical regions was mainly in stabilizing which bolstered the market costs in a certain extent. PP futures rallied after dropping, impact on market sentiment was limited. Merchants shipping followed market tendency and, observed market reaction. Plants in downstream purchased on demands, market trading and investing momentum was thin.
Intraday main quoted prices for wires of north, east and south markets are RMB 7300-7500/ton, RMB 7500-7650/ton and RMB 7700-7850/ton, respectively.  
As for operation, current moving average system still arranged in long; MACD green column shortened and, price continuously volatile at 7000 mark. Recent volatile on crude oil extended, whether the production freeze agreement remained uncertainty; risk was high and we recommend staying in observation.
 
 
                                               Dong LV (Investment Certificate NO. TZ008452)