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Edwina Jones
6 years ago
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1 Macro economy and copper price Huazheng Futures Min Ming

2 A concerning question: Whether 2010 will be a year with a new round of economic development or a long term winter of economic recession?

3 Harry S. Dent predicts in his the next round of economic circle : 2009 will be the starting point of the next round of economic recession and the ending point of nearly every prosperous markets And the 40 years economic cycle will be in started Is it just a historical coincidence that the summit of the 40 years economic cycle and 30 years commodity price cycle will be reached at the end of 2009? Many important cycles are structured with certain regular. We are fighting against recession, but are we clearly aware of this and ready for this? Do we have enough confidence to win this fight?

4 A lot of uncertainties exist in the fight against great depression, and world economy moves forward in great difficulties. 1. The slow recovery is a withdraw or reverse? IMF lowers its 2009 economic forecast for the U.S, saying its recovery will be a slow process.

5 PMI bottomed and rebounded in December 2008, Sept index was slightly lower than Aug 2009.

6 American non-agricultural employment figures : Not optimistic view of American employment situation

7 Good momentum appears in economies like Euro zone and Japan Newly emerged markets represented by BRIC nations showed clear signs of improvement since Q2 2009, among which China and India firstly overrun the critical point 年 1 月 1999 年 1 月 2000 年 1 月 2001 年 1 月 OECD 经济领先指标变化率 OECD 欧洲日本美国 2002 年 1 月 2003 年 1 月 2004 年 1 月 2005 年 1 月 2006 年 1 月 2007 年 1 月 2008 年 1 月 2009 年 1 月 OECD 经济领先指标变化率巴西中国印度俄罗斯 1998 年 1 月 1999 年 1 月 2000 年 1 月 2001 年 1 月 2002 年 1 月 2003 年 1 月 2004 年 1 月 2005 年 1 月 2006 年 1 月 2007 年 1 月 2008 年 1 月 2009 年 1 月

8 2.Underlying dangers in world economy in 2009 New form of trading protectionism Wanton depreciation of American dollar upsets world economic recovery. Heavy crisis in UK credit market Market confidence shakes in Euro zone due to the financial curtain Increasing employment pressure Frequent geopolitical friction Unstable international financial market demonstrated by the soaring gold price. Inflation anticipation shades on the market where deflation hasn t retreated.

9 3.Questions to think about: Is it a rational circumstance that the slowly rising economic figure gained at the cost of the stimulus packages that are rarely seen in history by many governments? The turning point really appears and economy rebounds? Conclusion: This round of economic depression triggered by financial tsunami is very severe, and there are too many interesting things lying behind these prosperous figures. We must focus all our attention on this.

10 A prominent economy-china is enough to affect world economy Analysis of the two endogenous strengths in Chinese economy Favorable demographic trend in China will reach its summit in China s economic power is in a great collection phase of outbreak since it had adopted the reform and opening up policy in 1978.

11 Interpretation of China economic indicators 1.Analysis of GDP growth rate China economy represents a V trend in 2009, and growth rate in Q3 is close to the level in 2008

12 2.Analysis of the growth rate of industrial added value This important indicator experienced a slow growth for 4 months since Nov 2008, but the growth pace accelerates in 2009 and the level in Q is nearly close to Sept level in 2008.

13 3.PMI Analysis of macro economy PMI reached 54.3% in Sept 2009, the seventh consecutive month when the figure was above 50%,the critical point, which signified a recovery of Chinese economy.

14 Other encouraging economic indicators: 1.Three driving forces in Chinese economy Exports: Exports shrank 24.9%, 22.1% and 16.5% in the first three quarters, with a narrowed decline rate and the overall rate reaching 20.9%. Rapid development in FAI with an accelerated pace in real estate Total FAI reached 15,500 bln yuan, an increase of 33.4% from the previous year, and 36.4% higher than the growth rate in the same period 2008, and investment in property market was 2,505 bln yuan, up 17.7% year on year, and the growth rate was 7.8% higher than the same period Total retail sales of consumer goods was nearly 9,000 bln yuan, an increase of 15.1% year on year, and 17% in real terms deducting the price factor, 2.8% higher than the growth rate in the same period Except export, whose contribution to economic growth was negative in the first three quarters, investment and consumption contributed 7.3% and 4% respectively to GDP growth during the same period.

15 2.CPI: Analysis of macro economy Although CPI declines by 1.1% year on year, the index reversed its falling trend in July compared with the previous month, and month on month growth rate grew 0.5% and 0.4% respectively in the following Aug and Sept. PPI increased by consecutive seventh month although its year on year growth rate still dropped 6.5%, and it is seems the deflation problems that haunted us in the early 2009 have gone with the wind. 3.Market liquidity indicators: New loans reached bln yuan in Sept 2009, total loans amounted to 39,000 bln yuan, an increase of 5,200 bln yuan year on year. M1 was 20,200 bln yuan, up 29.5% year on year. M2 was 50,500 bln yuan, up 29.3% year on year. M1 exceeds M2 for the first time, indicating that market liquidity will still be abundant in the future.

16 Main characteristics in this round of economic rebound: Market rebound is mainly driven by stimulus policies Investment is a single engine force, and consumption is insufficient and exports drag down the overall economy. Investment from government takes a large proportion, while private investment is scarce. Inflation anticipation increases on the rapidly rising credit loans.

17 Anticipation of the focusing and turning point in China s macro economic regulation The tone of current macro economic regulation has been set as continuity, stability and effectiveness, thus where are the focusing and turning points? The might focusing points in the post-crisis period The current and long term target is to maintain growth. Structural adjustment focusing on 4 levels. Regulate inflation anticipation: important warning signal of the turning point in macro economic policy Studying of the turning point in macro economic policy It takes 2-3 years for deflation to shift to inflation. It takes 20 months from bottom to peak level in economic cycle. Thus it is predicted the earliest turning point in China s macro economic policy will be around Oct 2010, or might later if China s recovery pace is dragged down by the world economy.

18 Conclusion: China s economy has rebounded firstly, but this rebound is unconsolidated, unstable and unbalanced. It is likely China s economy will keep a good momentum in the next 10 years even amid the economic fluctuations worldwide if macro economic policy is kept effectively, therefore China might lead the world economy to a full recovery.

19 Vague dollar: Dollar begins to depreciate against world s major currencies like Euro, Pound, Australian dollar, Yen and Yuan. Dollar index has fallen below 75 and reached the lowest level since the bankruptcy of Lehman Brothers, and the vague dollar will definitely increase the uncertainty in world s economic recovery.

20 Three factors affect dollar trend u Dollar cycle and global economy cycle u The US government s economy policy u Impact from dollar supply and US government s currency policy.

21 Professional view on dollar The dollar index fluctuated from Mar. 17 to Jul. 15, 2008 by four months. Can it stop dollar s falling trend?

22 The mutuality of dollar & copper price Dollar trend is opposite against copper price trend, which means the dollar in on an upward trend when the copper price is declining, and vice versa.

23 Conclusion: 70 is not the end for the devaluation of dollar Double deficit Loose monetary policy Stimulation of export Offset debt by devaluation Support point can only slow down the decline Signs of inflection point Reflection to export stimulation Tolerance to dollar glut Impact from credit crisis on dollar s position of reserve currency If the US government believes the dollar devaluation is benefit for the States, the dollar index will never pick up. Remember: when dollar devaluates, resources are the gold.

24 Prospect on copper price The copper price has been keeping an upward trend from the beginning of this year both at home and abroad. On Oct. 21, LME s copper price stayed at $6,670/t. Where s the copper price going? I ll analysis from with three methods. A)60-day moving average and time-cycle B)Long-term trend line C)Important pressing points

25 Prospect on copper price

26 Prospect on copper price 60-day moving average and time-cycle Based on LME s 3mths copper on an integrated K-line, 60-day moving average is the most important supporting line for long. We re very pleased to see LME s 3mths copper price broke ahigh point of $6548.6/t to $6,670/t. So the new rising room is open up. We should now focus on when the inflection point will come.

27 Prospect on copper price Long-term trend line

28 Prospect on copper price We can figure out that as the copper price is gradually coming up, it is harder for the futures price to go up further. The Blue Line is the last defense line. If the copper futures price breaks the line, there will be aregulation.

29 Prospect on copper price Important pressing points

30 Prospect on copper price Important pressing points The past trend is helpful to the trend in the future, which is proved several times. We found out that the price met a press point on $6548.6, but if it broke the line, there would be ahuge rising for the price.

31 Prospect on copper price Conclusion We can make aclear conclusion after analysis that if LME s 3mths price is to break $6,548.6/t, the futures price will climb up to $7,050/t or even $7,500/t; or the future price will go back down, but get first support at $5,250/t and second support at $4,150/t. But we prefer to the former judgment that the futures price will clime up to $7,050/t or even $7,500/t. Because the global economy is picking up especially China. The demand for commodities like non-ferrous and petrol will increase alot, so the copper price can get the support from fundamentals.

32 Welcome to Huazheng Futures

The analysis and outlook of the current macroeconomic situation and macroeconomic policies

The analysis and outlook of the current macroeconomic situation and macroeconomic policies Chief Economist of the Economic Forecast Department of the State Information Centre Wang Yuanhong 2014.05.28 Address: