Daily Report 250416 2016-04-25

Macro Economy
US stock mixed with up and down in Friday; Dow Jones index closed with slightly rise. Nasdaq index stock market where technology stocks are gathering went down. S&P 500 index ended decline, as a result of energy stock boost by crude oil price, closed with flat. From news side, US April manufacturing industry Purchasing Managers’ Index is 50.8, lower than expected 52. From data released by CFTC, hedge fund and other speculators bet on US dollar devaluation, which is first time of two years. This week the Fed will convene conference on interest rates; speculators believe that the Fed will claim on dovish again and stimulate US dollar to be weak. Recently market show low possibility of interest hike in April, but statement of this meeting, especially presentations about global economy risk and inflation should be pay attention to.
Domestically, rebar steel, hot - rolled coil, cotton and PVC futures trading volume increased sharply last week, making Shanghai, Dalian and Zhengzhou Exchange increase commission fee or release risk warn to investors. Currently, the market has transformed from steady rebound brought by the progressive realization of the expectation of economic warming as well as the upturn of the enterprises’ operation status, to the bull market driven by the funds. We suspect that the market are overcorrecting and doubt the continuousness of the uptrend. Besides, it seems that the attitude of the regulatory body is changing. Hence we advise investors to be cautious to participate in the market. What’s more, this Wednesday will release industry enterprise profit of March, pay attention on this data.

Stock Index
Last week stock index fall back from high point; rally trend might go away.
1. Stimulation isn’t benefit to transition. Recently easing credit and fiscal stimulation have caused a plainly reviving on economy data, but this stimulation’s long term affect isn’t optimistic, and might cause sequela like that of “4 trillion”; investors don’t agree with that policy will improve long term profit forecast of enterprises.
2. Under the easing monetary background, investors are worry about expected inflation; it’s generally accepted that no bull market under inflation, which is bearish to stock market. Under inflation, capital prefers commodity but stock.
3. As for asset shortage, nowadays credit default happens a lot, and credit interest margin creates stage new point; credit default causes more than 70 issuer cancel or put off all kinds of bonds since April, more than total of March, capital amount reaches RMB 68.79 billion. It caused investor’s worry about enterprise profit ability and cash flow.
Overall, effect from current easing credit, strong financial, stimulation from real estate market and other policies to structural adjustment of economic entity and, enterprise profit improvement is limited, or even in negative effect; off-set the favorable effect of rebound economy date. We recommend operating in fluctuation.

After one week sharply rebound, copper price start fluctuation last weekend. Crude oil and zinc fall back after rise early days, which indicates rollback of copper price. The reason of significantly rebound of bulk commodity recently might be macro-economy slightly recovery and consumption season, but mainly because of hyping up of liquidity. Under the circumstances that global economy lack of growth point, liquidity can’t enter entity, which will limit price rebound space. From copper market side, nowadays copper spots market is weak, LME spots premium increased from $20 in early April to near $10; inventory slightly increased. Domestic is lack of spots discount; storage stop declining since last week. From consumption, April consumption industry doesn’t continue recovery trend of first-quarter, but supply will be encouraged because of high price. With the end of consumption season and selling reluctance, we consider the possibility of copper off-season is increasing. we recommend waiting for the new opportunity to short after the end of rally.

Domestically, DCE soybean retraced following overseas market; soybean meal led the decline; oil against meal ratio stabilized and rebounded. Northeast China soybean spots price rallied about RMB 60-100 since last week. Basic soybean market sells more and grain merchants enter market with enthusiasm, which brings price increase. In addition, Shandong port import soybean is under commercial inspection. Ports of Shandong Qingdao, Rizhao and Jiangsu Dafeng import soybean suspend quotation, and delivery amount decrease; domestic especially northeast China soybean market price is boosted.
From soybean meal side, spots price increased sharply last week; most oil plants increased RMB 140-200/ton. Though fundamental side hasn’t change, but the soaring domestic and overseas sector future price causes domestic spots price increases; it has intrigued traders and the market purchase has transformed form cautious to active. As for operation: reduce soybean meal longing and arbitrage between oil and meal operates at 2.4-2.65:1.

Nature Rubber
Yesterday Shanghai rubber opens high then falls, up to spots trading period: domestic spots price is 1510-1520(-40); domestic cargo price is 1500-1520(-50); US RSS spots price is 1690-1710(-40); US RSS cargo price is 1720-1750(-20); Singapore cargo price is 1560-1600(-40); Thai cargo price 1570-1620(-40); mixed rubber price is 11600-11700(-200).
From new side, Bloomberg indicates Thai official claims to sell 0.2 million tons rubber storage; actually it’s Thai government delivering earlier 0.2 million rubber contracts with SINOCHEM group; abandoning storage is misunderstanding. From fundamental side, short term needs continues recovery; producing districts begin with May delivery. Domestic tyres flourishing selling situation continues. Overall, Three Futures Exchanges adjusted trading commission fee and margin of many contracts, and noticed risk control; short and long momentume both decreased, market enthusiasm dropped under the regulation from exchanges; tendency was estimated turned to strong volatile from unilateral upward trend.

                                                                                     Dong LV (Investment Certificate NO. TZ008452)