Daily Report 160516 2016-05-16
Stock Market
The industry data in April sees a downtrend as well as the credit data, leading to the transformation of stimulating direction. It is obvious that the thoughts of regulatory body transform from emptiness to reality. For instance, the CSRC start to strike at cash arbitrage of shares at a high price, such as trans-boundary private equity placement and return of Chinese firms which are listed overseas.These measures remind the market players of the bubble and middle & small stocks are likely to see a downtrend in the mid and long term as well as the popular concept stocks. The People’s Daily publishes an authority’s speech, illustrating that the L-Shape economy of China should last for several years,and the leverage is not recommended in economic growth, and stimulating measures on large scale would not be put into practice in the coming years. Stocks of large market value are not cheap due to the restraint of macro-economic structure as well as profit situations. Moreover, the incidents of credit defaults increase recently, leading to slump of bond insurance. Credit defaults could become not uncommon in the future, bringing more potential risks to economy and equity market. The motion of recovery is insufficient, so we tend to be pessimistic technically and the market is more likely to go down due to the least resistance.

Last week copper price was weak; price of the weekend was fluctuating around low point of April. Macro level is all line short. First is US retail data better than expected, and the Fed officials are more and more optimistic about interest hike. US dollar soared. Second is weekend China macro data all roll back except real estate. In addition, China official statement of reducing stimulation stresses on copper market. Back to basic level, last week LME spot goods premium fluctuated, but declined to only $8.5. Domestic spot goods increased before last trading date. Weekend premium was RMB 50-80, but most traders have already observed. Last Wednesday three biggest exchanges copper storage reduced 31000 tons, which was 506000 tons, in which 27000 was belong to domestic. This is normal because the storage of May is always declined in the past years. As a result of released copper production capacity, global copper supply is loose. Process cost is increasing, which has reached $92. The favorable process cost stimulates production activity. Copper market pressure increases with the off-season near. Technically, copper price went through low point of early April, and this price resistance is effective. Copper price will continue going down.

Domestically, DCE soybean rallied following overseas section, but soybean oil closely limit before weekend. Oil against meal ratio declined to 2.13:1. Spot goods side, North China soybean price is going upward; surplus grain dip; soybean with high quality is rare, which causes price continue going up. The rumor of soybean storage auction affects the purchasing power of sales market. Market’s focus turns to old grains. From soybean meal side, spot goods market followed the overseas section; port oil plant quotation was around RMB 2880-2950/ton. The market’s enthusiasm of chasing high is rising, and dealing volume is high. From mid and long term, as a result of overseas section strong tendency, and domestic cultivation recovery situation is good. DCE soybean will continue fluctuation upward situation following US market. Hold long position after call back, and be cautious about short position. As for operation, soybean long position can be held, and arbitrage between oil and meal observe temporarily.

Nature Rubber
Last week Shanghai rubber dropped with increased volume, US spot goods market continued dropped. Up to spots trading period on Friday: domestic spots price is 1360-1370(-50); domestic cargo price is 1350-1360(-50); US RSS spots price is 1570-1590(-30); US RSS cargo price is 1600-1610(-20); Singapore cargo price is 1430-1450(-30); mixed rubber price is 10600-11700 (-400). From news side: China April economy data is worse than expected; year-to-year increasing rate of April industrial added value, social consumption retail gross sales and January to April fixed asset investment rolled back. Newly increased RMB credit dropped 60% to 555.6 billion, less than expected 800 billion. Social financing scale dropped 68% to 751 billion. M2 increasing rate dropped from 13.4% to 12.8%. From industrial side, Qingdao bonded area rubber storage declined 5.9% to 230200 tons compared to the end of April; the decline range of 14500 is extending. For specific species, natural rubber decreases more, and mixed rubber inbound causes synthetic rubber storage increases. Shanghai futures exchanges storage increased 8600 tons to 313800 tons; storage futures increased 17000 tons to 291200 tons. Overall, after we indicated market weaken at the beginning of this month, domestic industry and Shanghai rubber are in a rush. Yesterday night section the price went down below average 60, and is expected to keep weak.

Last week PP futures rallied after dropping. From upstream side, up to Thursday night, FOB Korea propylene average price was $715.5/ton. Spot goods side, last week PP price rallied after dropping following futures market. Sinopec storage is high; profit is surrendered at the beginning of last week; futures price rallied at the mid-week, price decrease slowed. Trader quoted high tentatively, surrender range narrowly. Intraday main quoted prices for wires of north China, east China and south China markets are RMB 6800-6850/ton, RMB6750-6850/ton and RMB6850-6950/ton, respectively. As for operation, currently moving average system twines, MACD green column shortened; recent tendency is fluctuated, so we recommend observation.

                                                                        Dong LV (Investment Certificate NO. TZ008452)