Daily Report 150416 2016-04-15
Macro Economy
US stock market leveled off at market close; investors estimated enterprises’ quarterly performance and, the economy data which showed improved employment market and flat inflation. S&P 500 index edged up 0.36 point or 0.2% to 2082.78 point was closed to the four-month-high. Data showed US March CPI increased 0.9% year-on-year and, 0.1% month-on-month. Core CPI increased 2.2% year-on-year and, 0.1% month-on-month, as the lowest growth from last August and, was lower than market expectation. Last week initial jobless claim dropped 13,000 to 253,000, reached the lowest level since 1973. Data showed the US employment market was extreme strong but, inflation was still dissatisfactory. Along with the exacerbated crude oil volatile and, the high cardinal utility in the second quarter of last year, possibility on inflation sharply increasing in the future was little. From Fed side, Atlanta Fed President Lockhart indicated since the weakly consumption and investment, it was proper for Fed hiking interest rate in patience and, would not call for rate hike in April, which in June is probably a choice. Saint Louis Fed President Bullard indicated aim from inflation and employment had nearly accomplished but, should be cautious on monetary policy normalization. Both of above two officers were leaned to hawkish previously but, no more radical speeches from this statement; the Fed funds interest futures estimated probability of rate hike in April and June decreased to 1.2% and 15.8%. Rate will not hike in April has basically been commonly accepted; US dollar index growth slows down.
From domestic side, National Bureau of Statistics of China will release a spate of important data of GDP, industrial, retail and others at 10 o’clock, intraday morning. According to the mid-value estimated from Bloomberg, first quarter GDP expected to increase 6.7% year-on-year and, this would be the slowest growth ever since the first quarter. Meanwhile, March industrial added value expected to increase 5.9% year-on-year; total retail sales of consumer goods expected to increase 10.4% year-on-year. In addition, intraday is the last of PBOC releases March credit data, market expected new yuan loans increases over 50% to RMB 1.1 trillion month-on-month; social financing scale expected to increase nearly 80% to RMB 1.4 trillion month-on-month; M2 expected to increase 13.5% year-on-year. Above data needed to be focused.
Stock Index
Yesterday stock index volatile dropped then rallied under the bolster from downward. ICBC: this year domestic yuan loan plan increased RMB 850 billion; re-lending further increasing to RMB 2 trillion; overall new delivered loans planned to reach RMB 2.85 trillion. From data side, GDP and other important data will be released intraday, first quarter GDP expected to be 6.7%. Under the condition of financial boosting and, easing credit, data was expected not too poor. March both import and export showed plainly improvement year-on-year and month-on-month ratio, export growth sharply revived and, import growth downward range narrowed; trade deficit continued narrowing to $29.86 billion. From the last stabilized fixed investments data, the macro data was harder to continue weakening, which is uncommon over the past year. From reform side, firstly, during Business Tax to Value-Added Tax improvement, government transfers 500 billion profits to enterprise, which is real reform; the State Council cut payment to the social security funds over enterprises, which will save about RMB 10 billion to the enterprises. Secondly, debt-to-equity swap will bull the enterprises in the short term, but continuous arguing exists about its long term effect; thirdly, current default news shows up constantly, and risks accumulated from prior period exposes now; market convey worry by diving. But debt problems have occurred since 2012, and systematic default and credit shrink have not formed yet, and seems under control in the short term, which means bad debt problem is not that bad.
Thursday copper market trading and investing was thin, copper price continued volatile at recent rallied high point. On copper market side, LME spots premium decreased $1.5 to $17, inventory slightly increased 25 tons. Domestic copper spots were flat to premium RMB 50 but, spread between front month contract and forward month contract extended showed spots market supply loosed and, was lacked of consumption. Now is already nearing the mid of April, in term of time, the high point on copper price at most last to May when economy is bull; in consideration of current economy environment and copper consumption, we tend to the high point of copper price rally trend has already shown.
Technically, copper price is still under resistance, LME is $4900 and, domestic is RMB 37500; we will focus on if sign shows up on copper price revive trend closure.
DCE soybean rallied following overseas market; oil against meal ratio continued dropping to 2.494:1. Northern soybean price stopped dropping and stabilized; north east market purchase and selling momentum increased under the reviving south market demand. Heilongjiang areas surplus grain decreased to 20%. Downward trend on high quality soybean price is already limited; price in the future is likely to be strong out of stabilization; though the high moisture soybean is stabilized, future market is hard to say optimistic.
From soybean meal side, spots further increasing RMB 30-50/ton under the boost from overseas market; price adjusted for the second time led by Yihai Kerry but, market trading volume hadn’t plainly increased. Quotation is at RMB 2480-2520/ton. This week oil plants operation ratio sharply increased but, the soared US soybean would prolong the hammer on port arrival amount; soybean meal will rally after overseas market in the short term. As for operation: soybean No.1 contract fundamental is weak and, we recommend staying in observing; soybean meal holding long in low point; arbitrage between oil and meal short positions stopping profit under 2.5:1.
Natural Rubber
Yesterday Shanghai rubber volatile at high, US dollar spots market price dropped: domestic spots price was 1450-1460 (-30); domestic cargo price 1450-1460 (-30); US dollar RSS spots price 1650-1660 (-10); US dollar RSS cargo price 1660-1690 (-10); Thailand was in the Songkran Festival Day without quotation; RMB mixed rubber price 11400-11500 (-200). From news side: Thursday night released US March CPI data was all line failed to meet expectation; Fed this month rate hike hammer further lower; US dollar index dropped after data released. Overall: economy data boosted the commodity long momentum but, short term asset took profit and, market expected to fluctuate at high point. Chinese first quarter GDP will release intraday morning at 10 o’clock; industrial added value, fixed investment and consumption data is due. According to survey over economists from Bloomberg at Tuesday night, first quarter GDP growth possibility is at 6.7%.
Yesterday PP futures continued fluctuating. From spots side, domestic PP market price mostly dropped. Partial petrochemical reduced producer price, market trading momentum was thin and, futures went lower; practitioners’ mindset was bearish, quotation in low. Downstream plants observed the future market, actual quotation was limited.
Yesterday main quoted prices for wires of north, east and south markets are RMB 7050-7200/ton, RMB 7150-7400/ton and RMB 7350-7450/ton, respectively.
As for operation, current moving average system twisted; MACD exposure downward extended as weak pattern but, a great clamor has arisen around recently over crude oil production freeze agreement; PP is expects to continue volatile before Sunday and, we recommend staying in observing.  
                                                      Dong LV (Investment Certificate NO. TZ008452)