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Bulk commodity market operation analysis
!!Qiu Qinwei, SWS Research

2019-06-13 15:01:07

Qiu Qinwei¨s report is separated by three parts: 

First part, overall situation of bulk commodity market 
1. China and the United States have different financial cycles. The US is in a period of financial upswing, while China is in a period of financial decline and may last for 4-6 years. Sino-US trade war will last a long time. Currently, manufacturing PMI and inventory cycle show that economy is in a short downward period amid weak external demand and domestic demand, but there is a support for real estate and infrastructure. 

2. Commodity performance expectations: global macro-risk moves up, and more Fed interest rate cuts will support strengthening of precious metals in the second half of 2019. Cost support and real estate demand increase will boost ferrous metals. Stable investment demand and weak consumer demand will stabilize the performance of non-ferrous metals. US will enter de-inventory phase and OPEC+ production cut may support oil prices in the third quarter. Worsening trade situation, warming domestic inflation and supply-side problems of some agricultural products may continue to support firmer agricultural products. 

Second part, cotton and cotton yarn market analysis 
In May, USDA report predicted that cotton production will increase substantially in 2019 and 2020 and ending stocks will decrease slightly. However, there will be the most increase of new cotton production in the United States amid reduction of abandoned tillage rate, and ending stocks will see larger increase, so traders may hold bearish mood. 

Domestic new cotton production and import and export may be stable, but end-users demand will weaken significantly after Tomb-sweeping Day holidays, and cotton is generally bearish. Variables lie in the G20 summit, inflow of the National Reserve Vessel and weather changes. 

Third part, function and service of futures market 
At present, trading volume and open interest of futures and options in China are far below the global average, and there is still much room for development. Using the function of price discovery and risk hedging of futures options can help to solve practical problems of enterprises. Shenyin& Wanguo Futures can provide corresponding services and products to escort enterprises. 
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