Daily Report 200416 2016-04-20
Macro Economy
US stock market rose with fluctuation; Raw material stocks increased to the highest point of 9 months. S&P 500 index increased 6.46 point or 0.31% to 2100.8 point; broke 2100 mark and created new high point of 4 months. Data released yesterday showed that US March new housing starts and building permit were 1.089 million and 1.086 million, both were lower than expected; month-on-month decline range of 7.7% and 8.8% were unexpected for market. But February and March are off-seasons of new housing starts, and in the long term, estate market still maintains increase tendency. But media indicates that the struggled US property market is the signal of first-quarter economy slowdown, as to the first-quarter GDP that will be released this 28th; market estimates the slumped growth is unavoidable. The fluctuation of economy recovery process shows it’s correct of the Fed to be cautious about interest hike. Fed fund rate futures showed probability of rate hike in April is still 0% and, in June, September, December is 18.8%、33.8%、40.4%, respectively. Recently US dollars is weak, hammer on commodity market is not large.
Domestically, media indicated on April 20th of 2016, Xi Jinping, the Chairman of PRC, made a statement during his meeting with Paulson, the former Treasury Secretary of the US, that China had achieved stable, accelerated and sound economic growth faced with the pressure of downtrend of global economy. Gao Xiqing, the former Vice President of the China Securities Regulatory Commission, states that the trend of the stabilization of China’s economy is not firm yet, and it seems that the economic performance in the first quarter of 2016 is more dependent on the old economy as well as the government investment in the state-owned enterprises.From first-quarter real situation, the economy really turns better by stage, but through bolster of investment especially estate and infrastructure, consumer still with a low increase rate; new economy industry hasn’t become the main force for stable increase yet, and long term pressure still exists; next variation window might at the end of second-quarter.

Stock Index
The securities companies sector became strong in the end of the trade day yesterday. IF closed unchanged. The turnover of the two stock markets has fallen again. The majority of stocks in Shenwan Industries have seen price increase. Specifically, the military and the non-ferrous metal have seen the largest price rise, the price of stocks in coal industry went down, and the sub-new stocks as well as the concept stocks of rare-earth permanent magnet were quite active. According to the statistics of Securities China, there exists another 9938 individual investors holding A-share stocks worth more than 10 million RMB, with 23.6% growth month-on-month.
From news side, Chairman Xi stresses that the system and mechanism innovation should play a significant role in pushing forward the structural reform of supply-front. The General Office of the State Council issued a circular, presenting the quality improvement action plans for supply-side structural reform in 2016, in which quality improvement is emphasized including elimination of the backward production capacity and resolution of over-capacity. Quality improvement are expected in the focus fields, e.g. high-grade numerical control machine tools, large complete sets of technical equipment. Central Bank continues with MLF, and capital surface is expected to continue easing; A share is highly expected to join MSCI, and might increase trillions of capital.
Currently economy data shows a status of stabilizing and rallying; data might be stable under steady economy increase, and reformation continues carry forward; excess money flows into all sorts of fields like tide. But the difficulty of enterprise profit earning, under the background of easing capital, commodity market increases more than stock index.

Tuesday copper price rallied; LME increased 2.45%, and domestic increased 1.9%. As to the weakest sector of commodity, Tuesday copper rallied with the meaning of compensatory growth. Through analysis, first-quarter China economy growth is better than expected, and March index improvement brought great confidence to the market. But in the basis, this is related to first-quarter China credit release. Under the policy of steady growth and adjusting structure, facing improvement of house and commodity price, but there is little possibility for this releasing situation to be continued. Back to copper market, LME spots premium decreased $4.25 to $18.75; inventory decreased 2575 tons. Domestic spots discount were discount RMB 140-80; imported copper supply is sufficient, and part of middleman are mainly buying spots and selling futures; trading volume from downstream side is limited. Though it’s during consumption reason, inventory decreases limitedly; we are not optimistic about future market on copper price. Technically, copper price makes a breakthrough and goes upwards; there might be a soaring trend in a short term. We recommend waiting for a good opportunity to short.

Domestically, DCE soybean rallied following overseas market; oil against meal ratio fluctuated. Northeast China soybean spots price ended downward trend and became stabilized, but actually South China market trade volume didn’t increase. Flat trading situation continued and current rising price was driven from rising import price and middleman centralized replenishment; it is predicted that price tendency expected to be strong in the short term, but the range is limited because of supply and demand fundamentals.
From soybean meal side, spots price is basically stable, spots quotation from most oil plants increased RMB 10-20/ton. Data of Ministry of Agriculture shows that March pig breeding stock increases 0.9% month-on-month, and decreased 4% year-on-year; pig able to sow breeding stock is flat with last month, and reduced 6.3% compared with same period last year. It can be seen that farm situation is recovering, and demand for fodder is increasing, which boost the demand of soybean meal. In the short term, soybean meal will have a strong tendency, increasing easier than decreasing. As for operation: soybean meal longing in light volume when price is low; we recommend short arbitrage between oil and meal stopping profit and closing out, or trying to operate in long.

Yesterday PP futures opened high and went low; opened at 6861 and ended at 6700; trading volume increased 257,000 lots to 2.361 million lots; holding increased 67096 lots to 672,000 lots. From spots side, yesterday domestic PP market price downward moved RMB 50-100/ton. Producer price from Petro China south china, west china and other areas drops, in addition with futures price drops at mid-market, plants purchase momentum are thin. Merchant is mainly initiatively shipping; sales price is still lower than purchase price; transaction price is under negotiation; trading and investing momentum is thin.
Take wires as example, quoted prices for wires spots of north, east and south markets are RMB 6850-7000/ton, RMB 7000-7300/ton and RMB 6950-7150/ton, respectively.
As for operation, current moving average system twisted; MACD green column extended as week pattern. Recent tendency is expected to continue weakening out of fluctuation.

                                                                                         Dong LV (Investment Certificate NO. TZ008452)