It is not easy to lift the bottom of the rubber out of the mud

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Although the price of rubber prices is not easy to rise, the bottom may rise: the supply and demand structure in 2020 has not yet undergone a substantial change, and it is not easy for a sustained offensive increase. But the bottom may rise upwards: previously seen bottom opportunities may be difficult to see.

The main logic:

The supply and demand structure has not changed: the output potential of rubber planted in the past 10-20 years is still increasing, coupled with the growing production capacity of emerging rubber producing regions and countries, so the situation of oversupply is still not in 2020 Get radically changed.

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The weather is normal: The forecast of abnormal weather in 2020 has not yet been obtained, which indicates that changes in the market driven by extreme weather may be reduced.

There are some bright spots in demand: The automobile industry may be revitalized again with the support of policies, especially heavy trucks should have a lot of bright spots driven by the renewal of demand. Tires in 2020 may continue the experience of expanding exports in the past year.

Operation recommendations:

Wait for the bottom to appear and capture the bottom.

When the price rises irrationally, it is reasonable to capture high short selling opportunities.

Use the option tool to do volatility operations: for example, short the volatility when the oscillating market appears clearly, and long the volatility when the volatility increases significantly.

Arbitrage: arbitrage opportunities in the internal and external disks (the parity rate may rise), inter-month spreads (there may be a back structure), arbitrage opportunities in whole milk and No. 20 rubber (the No. 20 may be relatively stronger)

Risk factors:

1. Extreme weather changes beyond expectations.

2. The worse-than-expected deterioration of trade frictions has had a combined impact on the global economy.

3.The customs issued measures to reduce the tax on rubber to further reduce import costs.

4.The has depreciated sharply.

First, ups and downs for another year, rubber is especially in the mud

1. Rubber take-off and landing

The ups and downs of rubber in 2019. At the beginning of the year, Hujiao fell from a high level. It bottomed back and forth near the bottom of 10,000 yuan / ton and regained strength at the end of the year, but it has not yet broken the previous high. No. 20 plastic was newly listed on August 12, and the focus has now increased.

2. New varieties launched

1) Rubber options

Natural rubber options will be listed and traded on Monday, January 28, 2019. The current level of activity remains low. This is related to its complexity, after all, options are a much more complicated tool than futures. When the time passes and the investor’s cognition level improves, the transaction activity level will definitely be further improved.

2) Natural rubber standard warehouse receipt

In the last issue of the standard warehouse receipt trading platform, the natural rubber variety was launched from 9 am on May 27, 2019, marking that natural rubber has become a complete set of products such as “futures, options, insurance + futures, and standard warehouse receipt transactions”.

3) No. 20 plastic is listed

No. 20 rubber futures will be listed and traded from Monday, August 12, 2019. Although the current traded position is still low compared to natural rubber futures (formerly full milk tobacco futures). But its upward momentum is very clear. We have reason to believe that its activity will further increase over time and leapfrog into mainstream trading varieties in the future.

The listing of multiple categories of rubber in the previous issue will undoubtedly provide traders with a full range of tools. Among them, options belong to new derivatives, standard warrants belong to spot transactions, and No. 20 rubber belongs to the largest sub-item in the natural rubber category. The launch of these tools has undoubtedly played a huge role in the use of investor tools. For investors, it is important to and understand the important ones to further improve their profitability and risk management capabilities.

Supply impact: May shrink in 2019 and may expand in 2020

1. the weather

The weather in 2019 is likely to be smoother. No meteorological agency report on possible extreme weather in 2020 is currently available. Therefore, market changes caused by extreme weather in 2020 may tend to decrease.

2. Long-term impact of policy changes

On December 4, 2019, a Thai government spokesman said that the Thai cabinet has approved a 20-year plan in which the rubber plantation area in Thailand will be reduced by 21%, from 23.3 million rai (3.73 million hectares) in 2016. Reduced to 18.4 million rai.

We believe that this policy change may have a short-term impact on the market. But in the long run, the impact is small.

1. The cycle is long. The implementation period of this plan is 20 years, and the area is reduced by 21%. On average, the reduction is only 1% per year (this is still assuming that the area planted is unchanged).

2. The rubber farmers are scattered and the implementation is difficult. 80% of the rubber forests in Thailand are concentrated in the hands of small rubber farmers. If they are asked to cut down the trees and not plant them again, will the government propose compensation measures?

Changes in the rubber supply by government actions, especially in a country with a non-strong central government, will make it difficult to implement a strict transformation of the industry. We don’t think the Thai government has the ability to change this.

3.Changes in production by country

Due to the weakening enthusiasm of phenology and low-price tapping, in the past few months, the output of the rubber-producing countries have fallen to a certain degree. Only Cambodia is an exception: Cambodia has a thriving growth energy. China’s output is roughly the same as in 2018.

From July, production will increase seasonally. In the first 3-4 months, it is actually in a low-yield period for most countries. The potential of emerging countries, represented by Cambodia, is great. This makes the transition between supply and demand of rubber take longer.

In 2019, due to drought, high temperature, floods and other reasons, the overall output may be slightly reduced. The impact of current weather changes in the fourth quarter on production is also critical. If extreme weather reappears during this time period, then the reduction in production throughout the year will become a reality. The rise in prices is inevitable.

4.Long-term low prices lead to poor management

Since 2014, rubber futures prices have fallen into the low price trap (12,000 yuan / ton break). Although it has been repeated several times later, especially the period from the end of 2016 to the beginning of 2017.

One of the easiest outcomes at low prices is poor management. Using the Thai example, Thailand can earn more than 10,000 baht in a city. But the annual income of tapping is only 7,000, 8,000 baht. (Based on more than 300 strains per day). Large rubber gardens can’t even hire tappers. In this context, the rubber plantation is naturally poorly managed. The rubber farmers do not have enough motivation to fertilize and manage. The nutrition of the rubber tree is insufficient and the output is low.

Therefore, the problem of disease is, on the one hand, a natural disaster, and on the other hand, it also has a “human calamity” component. The fungus causes the roots to turn black and the glue cannot be cut out.

5. Situation outside Thailand

Output in Vietnam is likely to increase. However, this is due to Vietnam’s large of raw materials from neighboring countries. For example, Cambodia, Laos, Myanmar, etc. Vietnam ’s domestic output has fallen due to drought in the first half and more rain in the second half, which has led to a reduction in production.

Africa is also expected to increase production.

6. in conclusion

For the full year of 2019, we expect to shrink. This will to some extent support the market in the first quarter of 2020. Because this period also happens to be the stoppage time of many rubber-producing regions and countries. However, if the weather is smooth throughout 2020 and the price is appropriate, the output will inevitably increase. Just as the output in 2017 increased significantly, because the price center of gravity increased in that year, the enthusiasm for tapping increased significantly.

3. Demand: lack of highlights

1. Consumption Structure of China Rubber

Tires account for the absolute share of natural rubber consumption in China. In 2018, truck and bus tires consumed 3.38 million tons of natural rubber, accounting for 59%; passenger tires consumed 940,000 tons of natural rubber, accounting for 16%; and latex products consumed 460,000 tons (after drying), accounting for 8%; The bias rubber and other products consume 940,000 tons of natural rubber, accounting for 17%.

Truck and bus tires are undoubtedly the most important weight, followed by passenger tires. Latex is a consumer industry that may occupy an increasingly important proportion in the future. But it hasn’t been fully revealed yet.

2. Can automobile consumption usher in an inflection point?

1) The overall car remains sluggish

In 2019, China’s auto consumption is still in the doldrums. From January to October, car sales totaled 20,639,297, a year-on-year decrease of 10%.

Passenger car sales bear the brunt. From January to October 2019, the cumulative sales volume of passenger cars was 17,163,114 units, a year-on-year decrease of 10.9%.

The growth rate of commercial vehicles is from January to October, with 4 months being negative, from May to August. Cumulative sales from January to October were 3476183, a year-on-year decrease of 2.5%. Better than passenger cars and cars overall.

2) Heavy trucks stand out

The performance of heavy trucks is leading. The growth rate of heavy truck sales also had negative values ​​for four months, which were January and April-July. Cumulative sales from January to October were 980,138 vehicles, a year-on-year increase of 0.41%.

The reason why cars are generally sluggish, but heavy trucks are thriving, mainly due to the demand for updates and replacements. We know that the media recently exposed the overload of vehicles and the collapse of the bridge in Wuxi. Governing the problem of overloading has become more stringent. In the past, overloaded vehicles were allowed to pass for money, but now this phenomenon has greatly reduced. In the past, a bicycle that could carry a hundred tons also needed to be replaced by three vehicles. The replacement of standard trucks has become an important source of demand for heavy trucks.

Country III replacement is another important source of heavy truck demand. From 2009 to 2010, the sales of heavy trucks have begun to make a substantial leap, with monthly sales rising from less than 50,000 units to more than 60,000 units, and the highest even reaching 130,000 units (achieved in March 2011). Beginning in 2008, the national three standards have been implemented. Therefore, the growth of heavy truck sales at this stage mostly belongs to the national three standards. And from July 1, 2011, the implementation of the National Fourth Standard. From January 2008 to June 2011, a total of 2.74 million heavy trucks were sold. In addition, since 2009, the use time of these heavy trucks has reached more than 8 years, and it is time to replace them. Therefore, the renewal demand has also played an important role in the growth of heavy truck sales.

In addition, the increase in demand for express express clouds, the arrival of the heating season, and the demand for coal-pulling vehicles have also driven the growth of heavy truck consumption.

3) China’s auto consumption has a lot of room for expansion

However, the popularity of Chinese cars is far from that of developed countries. China’s total economic output will continue to grow steadily. There is still much room for improvement in residents ’spending power and purchasing power, and there is still great potential for automobile consumption.

3.Performance of the tire industry

The tire industry in 2019 is unsatisfactory. Production is still in the mire, although exports are slightly dawning.

The growth rate of China’s tire output has slowed down significantly. The proportion of export contribution increased. Industry profitability is okay. This is mainly due to stable raw material prices. However, the sales profit margin is still very low, only 4.2%. The market is currently cold, tire factory and dealer inventory are constantly rising, and the capital occupation is very large.

The production slowdown of the tire factory is partly due to the extensive development in the past, which caused the capital chain to break, environmental protection not in place, and insufficient technical capabilities, so it was in a precarious situation under the background of a weak market environment. Due to the poor performance of the automotive industry, the demand for supporting tires has declined. According to statistics from the Tire Branch of the China Rubber Industry Association, the number of passenger car tires in the first three quarters of 2019 decreased by approximately 19.7 million, and that of commercial vehicle tires decreased by approximately 500,000.

In 2019, the year-on-year growth rate of road freight volume dropped to around 5%. It was only 1.52% in October. The year-on-year growth rate of road cargo turnover was also similar. The relative sluggishness of road freight also affected the consumption of domestic tire replacement, resulting in shrinking tire products.

Exports are an important source of demand for tires. For the export of tires, we have a few points:

1. Exports are crucial to the release of China’s tire capacity. China’s tire exports account for 40-50% of the entire industry’s output. Nearly half of the tires produced in China are exported. Such a high proportion of exports makes domestic demand face huge risks under the condition of increased trade friction risks.

2. The United States is a high-quality export market, but it is also where frictions frequently erupt. In the past, China’s tire exports to the United States were the largest, because the United States has a very developed automotive transportation market and very strong consumption. The quality and price of our tires are highly competitive. However, the United States also has a particularly large number of trade protections for China’s tire exports. The recent trade friction has cast a shadow on the export of Chinese tires to the United States.

3.Outside the US, the EU is also an important export market. However, the EU has higher thresholds, with environmental regulations and tire labeling restrictions. In 2018, the European Commission conducted a “double-reflection” on truck and bus tires exported from China to Europe.

4.The development of emerging markets is also very important. Both Europe and the United States have high risks, so Chinese tire companies must find new consumption growth points outside these two regions. In 2019, China’s tire exports have blossomed in the Middle East and Africa in a large area and achieved great results.

In order to avoid the impact of Europe and the United States on China ’s tire reversal, many powerful companies in China have adopted strategic measures to go global. It is particularly distributed in Southeast Asia, such as Thailand and Vietnam. On the one hand, it is close to the origin of rubber raw materials, and the acquisition of rubber raw materials has a price advantage. On the other hand, the economy and culture of this region are closer to China. However, this region has limited consumption and carrying capacity, and will inevitably be exported to developed countries and regions for a long period of time. Therefore, the risk of “double anti” in the future will also be high.

The process of capacity transfer will eventually lead to a reduction in natural rubber consumption in China, while local natural rubber consumption in Southeast Asia must increase. So we will eventually see changes in the internal and external parity rates under the influence of this factor. Of course, this change will not happen overnight, but gradually. The change of the parity rate is more complicated, because the main contradiction in the current stage will be in the cycle of decreasing imports and increasing internal and external parities. The downward adjustment of the price ratio we are talking about will be seen in a farther cycle.

4.Real estate: Although not good, it is not too bad

1) May once again become the pillar of economic growth

At a time when economic growth is becoming increasingly debilitating, real estate may become the pillar of economic growth in the coming year, although we will still adhere to the “housing and housing speculation” policy.

Our main logic is:

The economic downturn is an indisputable fact. GDP growth in the third quarter of 2019 dropped to 6%. It is not known whether it will continue to break in 2020. But the infinite decline in economic growth is unacceptable. Then there are several sub-items in stable economic growth: infrastructure, manufacturing, consumption, and exports. Among them, the infrastructure is picking up slightly, the manufacturing industry is oscillating at the bottom, and the volatility of consumption is small. Exports are in full swing while trade frictions are in full swing, and I am afraid it will be difficult to improve much. Therefore, real estate investment may become a supporting force for future economic growth.

There are some signs to confirm this, one of them is “strategy according to the city.” Some cities where housing prices have risen too fast have indeed experienced policy tightening, such as Suzhou, Xi’an, Hohhot and so on. On the other hand, a large number of cities are taking care of the real estate industry by adjusting purchase restrictions, price limits, talent policies, settlement policies, provident funds, taxes and other methods. “Slightly relaxed” policies are constantly emerging.

2) Restrictions on purchases and loans may be relaxed

The manifestation is that some cities have relaxed the conditions for buying a house, and the 5-year LPR has been slightly reduced with the MLF.

3) Difficulties

In the past 2019, the cumulative year-on-year growth rate of newly started areas has remained between 8% and 10%. The cumulative year-on-year growth rate of the sales area of ​​commercial housing has been negative for most of the time, and only turned positive in October, which was 0.1%.

Therefore, we believe that the contribution of real estate to demand may be: to ensure that no large-scale landslides will occur, but that blowout growth will not occur. The impact on rubber demand is neutral to negative.

5. Infrastructure: 2020 may get out of the quagmire of 2019

In 2019, the growth rate of infrastructure investment continued the sluggish level of 2018. Continue to hover low. From January to September, the cumulative investment in infrastructure was 3.44% year-on-year, less than half of 7.21% of nominal GDP. The issuance of special bonds is also very powerful, with a total of 2.14 trillion yuan issued from January to October. The Development and Reform Commission also accelerated infrastructure approval, but the growth rate of infrastructure investment is still only slowly picking up. What is the reason behind this?

The lifetime accountability mechanism is an important reason for the slowdown in infrastructure investment, so the mechanism makes local government officials more cautious in raising debt and pushing infrastructure. The Minister of Finance Liu Kun stated that it is necessary to continue to maintain an elegant regulatory stance, establish and improve a cross-sectoral joint punishment mechanism, and seriously hold accountants for illegal financing violations by local governments, state-owned enterprises, financial institutions, and intermediary agencies. Responsibility. In 2018, the Ministry of Finance notified the two provinces of Jiangsu and Guizhou that they had been punished for administrative dismissal, administrative dismissal, and administrative demotion for those responsible for illegal local debts. Various provinces have promulgated various regulations to strictly limit the borrowing behavior of local governments.

The source of infrastructure investment is a problem for local governments. The cooling of the land market has slowed the increase in land fiscal revenue. The growth rate of revenue from the transfer of state-owned land use rights fell to 6.9% in January-October 2019. In 2018, the growth rate was 25%. Although the special debt is heavy, most of the quota is used for soil storage and shed reform, and the proportion of infrastructure use is not high.

The growth rate of infrastructure in 2020 may be repaired. There are several reasons: First, there is room for prices to restrict monetary policy, and countercyclical policies must rely on finances. Secondly, the special debt quota will be issued in 2020, which indicates that support for infrastructure may be very strong next year. Third, the number of special debt as capital funds has gradually increased. The system of improving the capital of fixed asset investment projects proposed by the State Council will make the problem of lack of capital in infrastructure projects resolve in 2020. The Standing Committee of the State Council stipulates that the minimum capital ratio of certain infrastructure projects should be reduced. For industrial projects encouraged by the state, capital can be raised through equity equity and equity financial instruments, and local governments can use fiscal funds to raise project capital. The reduction of the capital ratio can leverage the incremental funds to lift the ban. Fourth, special debt should be used for new infrastructure projects. The policy mentions that “focus on railway, rail transit, urban parking and other transportation infrastructure, urban and rural power grids, natural gas pipeline networks and gas storage facilities and other energy projects, agriculture and forestry water conservancy, urban sewage treatment and other ecological environmental protection projects, vocational education and trust Municipal and industrial park infrastructures such as child care, medical care, old-age care, cold-chain logistics facilities, and hydropower facilities. “

We believe that the accelerated pace of infrastructure investment in 2020 may bring more dawn to the downstream demand for rubber. Changes in rubber demand focus on the possible impact of this variable.

Four, macro variables

The macro of 2020. According to the research results of our macro team, we believe that the monetary policies of central banks in various countries will implement the loose policy more neatly. As the economic development of different countries is different, of course, differentiation has been formed in the degree of easing.

1. China: Expected growth bottoms out

We believe that in 2020, economic growth will see a bottom position. Consumption will continue to be under pressure, but long-term potential is considerable. Real estate may continue to be under pressure. Infrastructure may be working.

1) Overview of economic growth

China’s economy is still at a low level, and it will face arduous security tasks in the future.

2) Fiscal policy keeps expanding

On the one hand, the expansion of the fiscal deficit has tax reduction factors, and on the other hand, the expenditure factor also accounts for a large part. In 2019, there were three months in which the year-on-year growth rate of expenditure exceeded 10%. However, the year-on-year growth rate of income is mostly within 5%. It reached 8.26% in October, more than 5%. Fiscal policy is the main means of stabilizing economic growth.

3) Monetary policy is constrained

In monetary policy, there are mainly distinctions between traditional and non-traditional instruments. Among them, the traditional tools include interest rate cuts and RRR cuts. These tools have a greater effect. Non-traditional monetary policy tools, such as MLF and SLF, pay more attention to short-term adjustments, and have relatively little impact on the two goals of economic growth and inflation control.

Under the pressure of inflation expectations, both the growth rate of money supply and total social financing have limited growth. This shows that China has maintained greater restraint in the formulation of monetary policy. In particular, we noticed that the CPI jumped to 3.8%, which further restricted the central bank’s manipulation of monetary easing.

We will find that the central bank will become more sophisticated in its policy measures. For example, the purpose of controlling the market is achieved through short-term operations such as MLF and SLF.

2. US: Expected to continue cutting interest rates 1-2 times

Unemployment data in the United States is doing well, staying within 4%. Inflationary pressures are not great either. In 2019, except for the year-on-year CPI of 2% in April, the other months were within 2%. Core CPI was slightly higher year-on-year, but the highest was only 2.4% in August and September.

But beyond the good news, the United States also has some bad news.

1. Manufacturing is underperforming. Since August 2019, the U.S. manufacturing PMI has fallen to less than 50, which lasted until November at 48.1. This indicates that the US manufacturing industry is in a state of weakness.

2. Inflation data is poor. Similar to CPI, PCE data is also low. For most of 2019, the core PCE for the month was between 1.5-1.7. The PCE for the month was between 1.3 and 1.5. Both are relatively low levels.

The Fed’s rate cuts have also triggered interest rate cuts in a number of countries. The simultaneous cuts in interest rates by the central banks of these countries have helped alleviate environmental pressures in global financial markets and ease investors’ concerns about slowing economic growth. Background in loose policy

3.Relationship: Trade friction

On the surface, the trade dispute between China and the United States occurred in March 2018, but from the root, it has a long history.

1) Dissatisfaction in the United States is mainly reflected in:

1. The US trade deficit with China is too large. In 2000, the U.S. deficit with China was 83.1 billion U.S. dollars, and in 2017, it rose to 375.2 billion U.S. dollars, an increase of 3.5 times.

2. China has not fulfilled its commitments when joining the , infringing on the intellectual property rights of American companies. For example, require American companies to transfer technology to China: through approval procedures, safety assessments, environmental assessments, and energy conservation assessments.

3.China implements industrial policies in a number of areas, restricting market access for foreign manufacturers and service providers. Many subsidies are issued for products with independent property rights.

4.China did not follow the Western vision of a market economy and democracy as the United States envisioned.

5. China maintains its exchange rate at a relatively low level, giving its manufacturing a competitive advantage over its competitors.

2) has a long history

US Trade Representative Lighthizer’s testimony in 2009 and 2010 in Congress and Navarro’s Deadly China published in 2011 both expressed dissatisfaction with the current state of trade.

3) China’s attitude

1. China-US trade is mutually beneficial. Although the trade surplus is recorded in China, profits are flowing into the United States.

2. The US is full of prejudices. China has joint ventures with foreign companies and has the right to request technology transfer.

3.Fulfilled relevant commitments on trade in goods and . For example, lower taxation levels.

4.The United States imposes export and investment restrictions on China. Discriminate against Chinese companies investing in the United States. The Committee on Foreign Investment in the United States has continued to strengthen its scrutiny of Chinese companies’ investments in the United States.

5. US abuses trade remedy measures. From the 1980s to 2018, in the United States’ anti-dumping investigations launched against multiple countries and regions, China was the country that suffered the most double-anti-dumping. The sum of the bans imposed on the second to eighth countries. The tax rate is also the highest. The anti-dumping tax rate on Chinese enterprises is 199.43%, while the highest ruling tax rate for other countries is only 47.79%.

4) The nature of trade friction

1. Although international trade is a win-win situation, it has a strong income distribution effect. For the United States, the technology and financial industries have a comparative advantage and therefore benefit. But manufacturing has suffered.

2. The decline of American manufacturing and the rise of China are the socio-political reasons behind trade frictions.

3.The United States believes that China’s political authoritarianism, economic national capitalism, trade mercantilistism, and new expansionism in international relations have challenged the Western world led by the United States.

4.The protractedness and severity of trade frictions cannot be ignored.

5. Trade frictions cannot resolve trade imbalances. Under the influence of economic structure, global value chain division of labor, a large number of multinational corporations in the United States investing in China, restrictions on high-tech exports to China, the mode of low consumption in the United States, and the status of the US dollar ’s international reserve currency, trade imbalances have become normal.

6. Contain China. The area where the United States levies taxes on China is not the low- and medium-end manufacturing industries where China has a comparative advantage, but high-tech industries such as aviation, new energy vehicles, and new materials.

7. Judging from historical experience, after the trade friction progresses, there is bound to be both defeats. Therefore, it is necessary to stop war. The preferred countermeasures include exchange rate depreciation, tax reduction, and active fiscal policy.

8. At the beginning of the trade friction, there were some over-inflation and over-confidence trends in the country, and the trade friction was undoubtedly the best sober agent. China’s economic prosperity is based on the application of science and technology, but there are shortcomings in the research and development of basic technologies.

5) Impact of trade friction on rubber

There are two ways for trade friction to transmit rubber. One is through the transmission of the tire industry: As the tire trade is blocked, China’s exports to the United States are reduced, and China’s tire demand is reduced, so China’s natural rubber demand will decrease. Therefore, it has a negative effect on domestic prices. (Although the global supply and demand environment has not changed fundamentally) the other is to influence the transmission of macroeconomics. In the context of trade frictions, we would expect each other’s macroeconomics to be negatively affected. When aggregate demand falls, it will have a negative impact on all commodities, and rubber is no exception.

In the process of trade friction, it is more important to experience the following major events.

On March 22, 2018, the United States White House officially signed a trade memorandum with China, announcing that it may impose a tax on 60 billion US dollars of goods imported from China, and restrict Chinese companies’ investment and mergers and acquisitions in the US

On July 6, 2018, the Trump administration officially levied a 25% tax on US $ 34 billion worth of goods from China, marking the official implementation of Trump’s taxation policy for China.

At the G20 Buenos Aires summit on December 1, 2018, the leaders of the two countries reached a consensus and agreed to hold a 90-day negotiation and suspend new trade measures during the negotiation period.

On August 23, 2019, U.S. President Trump tweeted that the United States will increase the existing levy of $ 250 billion in Chinese goods on October 1 from 25% to 30%; scheduled for September 1 The tax on another 300 billion US dollars of Chinese goods effective today will increase from 10% to 15% of the original plan.

6) It is difficult to effectively resolve trade frictions in the short term, but there is no need to be overly pessimistic

It can be seen from the above analysis that the differences between the two countries in trade frictions are very deep, and it is difficult for the two sides to reach consensus in a short period of time. However, based on the economic damage that the tear has caused to both sides, trade friction is more likely to be a long and continuous struggle. Regarding trade frictions, we need to maintain high priority without being overly pessimistic. For rubber, the export of tires has found a certain degree of replacement outside the United States. China’s share of US tire exports is declining. Therefore, the direct impact of the trade friction incident on tires has faded. The main impact is the transmission of damage through macroeconomics. The impact is more complicated. We should believe that the government can come up with effective means to respond.

V. Rubber Options

Rubber options are listed on January 28, 2019. But the volume is very small. Only deals on the main contract. Such as the 2001 contract and the 2005 contract.

We believe that the trading of options is not active. The main reasons are:

1. Market awareness is not enough

Compared to futures, options are a far more complicated product. There are many factors that determine the price of options, such as strike price, underlying futures price, volatility, expiration time, and risk-free interest rate. It takes a long time for investors to fully recognize this tool and be able to use it freely. Although our futures company has gone to customers for training several times, the customers are still confused.

2. The volatility of the rubber price itself has been low for a long time

During most of the year, rubber price fluctuations are very small (only a few time periods may have large fluctuations). This prevents the use of options as a volatility instrument.

As a new type of trading tool, options can achieve the goals that futures cannot achieve. If we consider stocks as one-dimensional and futures as two-dimensional, then options are likely to be three-dimensional, four-dimensional or even more-dimensional tools. It can form the role and impact of “dimensional reduction strikes.” )such as

1) Short Volatility

The biggest feature of the current rubber market is the decline in volatility. For futures, the reduction of volatility is its weakness, and it is difficult to put forward effective countermeasures for low volatility at the futures level. However, options are not the same. The purpose of short volatility can be achieved by straddling options, wide straddling options, and condor options.

2) Increased leverage

When judging that the market may fluctuate greatly in the future, you can buy deep call or put options. The option cost is very low, but once the market fluctuates, you can get rich returns.

We believe that the combination of options can generate more products and tools, and can more accurately express investor claims. With the further maturity of the investor community, the option option will eventually be carried forward.

6. Conclusion

We believe that in the first half of 2020, the market may still be affected by the aftermath of weather, disease and other factors in 2019. The price will reach a relatively high point, and the bottom up is a relatively certain event. However, the difference in 2020 is that this year may be smooth sailing. When prices rise, output will inevitably increase. Therefore, we believe that after the start of the production season in the second half of the year, prices may once again return to the dust.

In terms of price comparison, a relatively stronger internal disk will be maintained in the first half of the year, one is that domestic imports are expected to decrease, and the other is that this round of strength is obviously that China is running with foreign countries, and the internal disk will be ahead. The opening of the tobacco sheet window may eventually become a watershed in the price of rubber.

Driven by this round of market, No. 20 glue will inevitably expand its activity: because the position limit of No. 20 glue is smaller and more in line with the needs of the industry. The original whole milk futures only maintained a high level of activity due to the existence of inertia, all of which will slowly see changes in 2020.

Investors will be more adept at using options tools. With the option tool, if you are able to grasp the larger market, you can undoubtedly get higher profits. Therefore, this will definitely stimulate investors to deepen the research and use of options tools.

The spread will be more reasonable. This has been shown in 2019. The 1-9 spread has never increased irrationally. We think that this spread will become more rational in the future. The narrowing of non-standard arbitrage is also natural.

Translated by Google Translator from http://www.cria.org.cn/newsdetail/52435.html

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