Daily Report 110516 2016-05-11
Macro Economy
Domestically, according to the data released yesterday, the growth rate of the CPI in April amounts to 2.3%, remaining the same level for the last three months, mainly due to the substantial rise of pork price, with an increase of 33.5% YoY. The PPI drops 3.4% YoY, going down for 50 consecutive months, but recovers for the two consecutive months on the basis of MoM. We believe that the CPI in China is now on a structural rise but the prices of non-food goods and core goods do not see substantial change, showing that sharp deterioration of inflation is unlikely to happen in the short term. However, the carry-over effect resulting from various factors including pork price could enable the CPI to maintain at the current level.
 

 
Stock Index
Yesterday stock index narrowly fluctuated. The stocks of large state-owned firms whose names start with China go strong to support the market, while the stocks in White Wine, Appliance Manufacturing, Non-ferrous Metals, Coal see the most substantial drop in price, and the stocks with concepts of shell and ST experience continuous decrease in price. The prices of the stocks which are listed in overseas market recover after the previous slump. People’s daily indicates statement of authority that L type economy will last for several years, and can’t be leveraged. Now the CSRC interrupts on cross boundary targeted additional issue and China concept stocks return.
Firstly, economy data recovery might be true, but is at the cost of long-term development. Now the tendency might change, and stimulation might be weaker. The prod of private investment of the State Council can be seen as economy environment deterioration.
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.
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.
We tend to be bearish on the basis of technical methods, and the market index is more likely to go down.
 

 
Copper
Tuesday copper market was lack the power of rallying; price narrowly fluctuated at low point. Domestic macro data released yesterday showed that April CPI increased 2.3% year-on-year, and PPI decreased 3.4% month-on-month. Although expectation is good, but copper market still bears the effect of economy slow down. Back to copper market, LME spot premium decreased $1.25 to $11.25; storage increased 1300 tons. Domestic spot premium increases RMB 20, which is flat to premium 30. Rigid demand increases after continuous price going down. From supply side, Teck Resources and Antofagasta confirm copper output of this year again, which is 305000-320000 tons and 710000-740000 tons separately. Through analysis, copper Antamina of Tech Resources is the main output increasing project. Copper Antucoya will concentrate main increasing output for Antofagasta. But several mines of the two enterprises are under the output influence of mineral quality pressure. Unchanged expectation shows that output increasing project processes good. Technically, copper price dropped below bolster this year, which is $4750 of LME and RMB36080 of domestic. We will focus on whether this resistance is effective in short term.
 

 
Soybean
Domestically, boosted by overseas section, domestic section increased today. From spot goods side, North China purchase price stopped increase and kept stable. Average filtered purchasing price of all districts increased to RMB3800/ton, and then was difficult to continue going upward; showed the market’s enthusiasm of chasing was calm down. Nowadays, market bad factors showed gradually. There is news that on the 25 May national temporary reserve soybeans will be sold, which is mainly from 2011 to 2012; the quantity and price is not sure. From soybean meal side, yesterday spot goods price of several districts went down, but overnight USDA report is favorable; domestic spot goods price will increase. As for operation, soybean long position can be held, and arbitrage between oil and meal observe temporarily.
 

 
PP
Yesterday PP futures opened high and went upward; opened at 6551, and ended at 6693. Trading volume increased 20608 to 0.763 million lots, and holding decreased 50938 to 520000 lots. From spot goods side, yesterday domestic PP price slightly went down. Part of producer price of petrochemical decreased, and bolster for the market costs weakened. PP futures rallied after opened low and went downward; effect on market psychology was limited. Traders sell with profit surrender. Downstream factories are not willing to receive the goods. Market is under observation atmosphere. Firm offers are mainly with small amount. Intraday main quoted prices for wires of north China, east China and south China markets are RMB 6600-6800/ton, RMB6600-6700/ton and RMB6600-6700/ton, respectively. As for operation, current moving average system changes to downward, MACD green column lengthened, and recommends downward trend; focus on the performance near average lines.
                                                                              Dong LV (Investment Certificate NO. TZ008452)