Daily Report 090516 2016-05-09
Macro Economy
In April, the Chinese exports dominated in RMB increase by 4.1% YoY and the imports drop by 5.7%, resulting to a trade surplus of 298 billion RMB. While the exports and imports dominated in USD decrease by 1.8% and 10.9% YoY respectively, leading to a trade surplus of 45.56 billion USD. In total, the fall in foreign trade growth meets our previous expectation that the trade would maintain weak recovery but dramatic growth is unlikely to happen under current international environment.

Stock Index
Last Friday China stock index sharply dropped; went crashing through the increase range after holiday. People’s daily indicates statement of authority that L type economy will last for several years, and can’t be leveraged. Now stock index is at unfavorable position. Long attitude may be entirely wishful.
Firstly, economy data recovery might be true, but is at the cost of long-term development. Now the tendency might change, and leverage stimulation will not carry out. The prod of private investment of the State Council can be seen as economy environment deterioration. Industry is difficult, and data is relied on state infrastructure projects; investment for fixed assets only slightly increases from 10% to 10.7%.
Secondly, Profit on stock enterprises hasn’t substantially improved; the earning quality (turnover ratio, main profit to gross profit ratio) over enterprise in reality is decreasing in 2015 annual report. The listed company stock price is less raised under profitability, but rose relying on concept, additional issue and merger. Speculation on shell resource is popular and, assets cash after price rallying. Hence, rumor has it the CSRC plans to suspend the Chinese concept share listing in domestic which impacts the market immediately.
Thirdly, there is no new concept in the new market, and no new real favorable news of enterprises. Pension fund into market, reform of state-owned enterprises and manufacturing industry arrange are concepts been hyped up before.
Fourthly, nowadays credit default events increase, bond issue size decreased, which bring essential risk to economy and stock market. Overall, the most benefit news is data stabilization. But market is already numb to this, and considers the leftover might be bigger. In addition, the tendency might be changed. Profitability might not turn better, and people that waiting for cash at the high point is more and more; confidence will lose at high point. Be cautious for bottom fishing, and the probability of short might be larger.

After last’s crash, copper price narrowly fluctuated during weekend. Last Friday, US non-farm payroll was weak, but US dollar still showed strong tendency, with risk index still below average. Several presidents of the Fed still claim US will increase interest rate this year. US dollar still has the trend for trading 94.635. China foreign trade data rolled back at weekend, and proved again that April data can’t last March’s recovery. China officially claims that its economy is under the tendency of L shape, and macro data released this Saturday will prove it. Back to copper market, LME spot goods discount was $15.5 during weekend, and storage increased 2300 tons. Last week, storage of three main changes increased 6124 tons. CFTC data showed that last week position lacked change; long is 7460 slots more than short. China wrot copper and imported copper increasing rate was just 4.7%, much lower than 29.4% of first-quarter. Technically, copper price is near the rally resistance position of this year; whether this price will be broke through depends on downward space is open or not.

Domestically, DCE soybean fluctuated following overseas section. The strength of oil and meal changed, and oil against meal ratio increased to 2.33:1 form 2.25:1 low point. Northeast China soybean spot price is stable and relatively strong. High quality soybean is in small amount with high price. Production place is difficult to purchase. Nowadays Northeast district is during spring sowing, and soybean purchasing and selling have cleared the way to spring sowing. Basic high quality raw grain price increased to near RMB 3800/ton, which is still high. From soybean meal side, domestic soybean meal spots price slightly increased out of fluctuation. Price is boosted by overnight US soybean market ending high. In addition, trading is not bad recent days, and some oil plant increases volume; stronger the mindset from oil plants to bolster price. As for operation, domestic and overseas soybean meal is weak, so soybean meal long position should reduce or close off, long arbitrage between oil and meal can be hold.

PP futures dropped last week. From upstream side, up to Friday night, FOB Korea propylene average price was $705.5/ton. From device side, current operating ratio was about 85.6%, slightly lower than preceding week. Last week domestic spot goods price dropped slightly. Global oil prices and PP futures price dropped. Sinopec enterprises producing prices are under pressure, and traders sell with market price; downstream factories don’t increase volume. Intraday main quoted prices for wires of north China, east China and south China markets are RMB 6650-6800/ton, RMB6750-7000/ton and RMB6750-6850/ton, respectively. As for operation, current moving average system changes to downward, MACD green column lengthened, and recommends downward trend; focus on average 60.
                                                                              Dong LV (Investment Certificate NO. TZ008452)