Recap #
Last week C2609 reached a seven-month low of 2256, then rebounded on the same day. Had I followed my plan last week, I would have been washed out.
Observations #
This week the commodity markets in China saw a broad sell-off, except for petrochemicals.
Grains and Animal Products #
Starting with the corn markets, last week C2609 seemed to have stabilized, but C2701 didn’t even have an up day. It was said that spring corn has started to enter the market, and the market expects a bumper harvest for spring corn.
The term structure of corn futures also illustrates expectations for lower prices for spring corn.
Pig farming is the biggest downstream sector for corn. Live hog futures plummeted last week, as did egg futures. This implies lower demand for corn.
Infrastructure and Real Estate #
Rebar futures broke the round-number level of 3000, reaching the lowest level since its first trading day, and iron ore futures also broke the round-number level of 700, also reaching the lowest level since its first trading day. It’s hard to tell which drove which — it’s possible that they drove each other.
From the term structure of rebar futures, we can confirm that supply far exceeds demand in the market.
Also, glass and soda ash futures also plummeted without rebounding, both reaching the lowest level since their first trading day.
Policy Signal #
On 30th July, the Politburo meeting released some interesting policy signals. Below are some excerpts:
……实施好更加积极的财政政策和适度宽松的货币政策，充分发挥各项存量政策效能，及时谋划出台务实管用的增量政策，加大逆周期调节力度，加力扩大内需、优化供给……宏观政策要发力提效，加快财政支出和债券资金使用进度，……综合运用并适时调整货币政策工具，优化实施财政金融协同促内需政策……要有效扩大国内需求……要营造公平有序的市场竞争环境，制定实施全国统一大市场建设条例，继续综合整治“内卷式”竞争……稳定生猪等农畜产品生产和价格，促进农民稳定增收。做好农资保供稳价，抓好农业生产，夺取秋粮和全年粮食丰收……稳定房地产市场，实施好一揽子化债方案，扎实推进地方中小金融机构改革化险、减量提质。深化资本市场投融资综合改革，提升资本市场韧性和信心……
On the same day, treasury bond futures, especially the 30-year treasury bond futures, surged.
The meeting also announced that the fifth plenary session of the 20th CPC Central Committee would be held in October. Let’s wait and see if there would be any unexpected policy releases then.
Plan #
I planned to force myself to plan a trade every week. However, I don’t think it’s a good idea to trade next week, given the broad sell-off last week. Even if the prices stop plummeting, it’s hard to imagine they would rebound hard. So next week I think it’s better not to trade at all.