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Why Will Zheng Cotton Not Recapitulation In 2016?

2019/6/12 9:59:00 148

Zheng Cotton Quotes

I. definition of inventory cycle definition

After 2000, China's complete industrial enterprise stock cycle has 6 rounds (each round contains four stages: active inventory, passive inventory, active replenishment and passive replenishment).

Active inventory: economic downturn, declining demand continued for a period of time, the company's initiative to reduce production capacity.

Passive inventory: the initial stage of economic recovery / demand recovery, enterprises do not realize that they are still pessimistic, do not actively increase production capacity, but continue to consume inventory.

Active Replenishment: after the economic recovery, demand will pick up for some time, and enterprises will take the initiative to increase production capacity.

Passive Replenishment: the initial stage of economic downturn / demand decline is not obvious. Enterprises do not realize that they are still optimistic. They have not actively reduced their capacity and accumulated inventories.

Two, the condition of Zheng cotton rebounding in 2016

Many people think that in 2016, after the fall of Zheng cotton, they started a big rebound. They thought that the cotton price fell to such a low level and it would repeat itself. This is very wrong because the macro environment is quite different. In 2016, the cotton price rebounded at low level, which was established at the end of stable consumption of spinning and clothing, and the inventory of finished goods and finished goods continued to decline. Grid, the entire industrial chain has entered a passive inventory stage, price increases can be transmitted downward.

But this is quite different. The consumption of terminal spun clothing is not stable but deteriorating sharply. Under this background, the industry moves from active inventory to passive inventory, and now it can not be seen at all. If the cotton price rises, the price of cotton yarn and grey cloth will not increase in the middle and lower reaches, that is to say, the short-term rise of cotton prices will encounter downstream resistance, because the terminal weak needs to be weak and extend the active library. The cycle of storage is moving towards the passive storage cycle. Let's look at the specific process of Zheng cotton rebound in 2016:

1. In April 2016, cotton futures and commodities reached a low level and opened up a sharp rebound. This period corresponds to the passive passive inventory cycle (April 2016 -2016 August). The spinning and weaving industry is also in the passive inventory cycle at the same time. This needs to see the following figure 3 instead of the following figure 1. After the spot water started to open up (the impact of China's supply side reform brought about by the rise of the resonance of commodities and the flooding of liquidity), Zheng cotton rose to drive cotton spot and cotton spot rise to drive the price of cotton yarn and cotton cloth in the middle and lower reaches, and the yarn and grey fabric inventory increased in the context of the expected price increase and the sales of the end spinning clothes were still weak. A detailed description of the process is shown in Figure 1 below.



2, from the following figure 2, it is more clear that the rise of cotton prices in April 2016 corresponds to the decline in the growth rate of the downstream textile industry and the terminal apparel and apparel industry. How can cotton prices rise and drive up the price of cotton yarn and grey cloth in this context?



3, under the above background, the reason why cotton prices can rise and drive up the price of cotton yarn and grey cloth is: at this stage, the consumption of the terminal of the spinning and weaving clothing keeps stable, especially in the passive going stock cycle, and the spinning and finishing products inventory has dropped substantially. See Figure 3 below, that is to say, from the terminal spinning service consumption end, especially the terminal finished goods inventory keeps declining. There is no kinetic energy to resist the price of cotton, cotton yarn and grey cloth in the upper and middle reaches of the industrial chain. Superimposed on cotton before 2016, the stock of cotton yarn and grey fabric has been decreasing continuously, that is to say, the resistance of the terminal and the yarn and cloth storage in the middle part are low on the basis of the rebound.



At the moment, these elements that trigger the sharp rebound of Zheng cotton in April 2016 basically do not exist.

Three, why do not have the condition of Zheng cotton's big rebound in 2016?

1. In April 2016, the global monetary cycle of Zheng cotton's rise was different from the current one.

(1) in April 2016, the macro inventory cycle before Zheng cotton rose was the active inventory cycle (from September 2014 to February 2016). Before that, the global monetary easing potential to stimulate economic momentum was brewing, reflecting that although the United States opened a small stagnation of monetary easing valves, the sign was announced in December 17, 2015 early morning to raise interest rates by 25 basis points, but the whole is still loose. The global liquidity increase is mainly reflected in the European Central Bank. In March 2016, the European Central Bank lowered the overnight deposit interest rate and financing interest rate, and expanded the QE scale from 20 billion euros to 80 billion euros per month, and launched a new round of long-term refinancing operation TLTRO2. In January 29, 2016, however, the BoJ announced that it had cut interest rates from the bank's excess reserve account from February 16th to -0.1%. The scale of maintaining the base money annual growth of 80 trillion yen (QQE) remains unchanged; for China, the period of July 2014 -2016 March is the third period of monetary easing in China after the US financial crisis in 2008. This period reduced the rate of interest reduction by 6 times for the 5 time. This not only brought about a flood of liquidity, but also a major purchase configuration, including cotton, as a staple commodity of risky assets. Speed up the whole industrial enterprise, including the spinning and weaving industry, has the initiative to go to the inventory cycle to move towards the passive inventory cycle.

(2) but at the moment, the US substantive easing has not yet been opened. It is only recently expected to strengthen, and further monetary easing in Europe and Japan has not been launched. China's monetary easing is constrained by high debt and is very temperate. It is hard to see the flooding of the past. The monetary policy has lagged behind the economic stimulus. Because of the high debt, the current and future stimulus will be more passive. It is the core of the whole industry chain that the weak demand for the end of the spun apparel industry.

2. In April 2016, the cotton textile and apparel industry chain's terminal consumption was different from that of Zheng cotton.

(1) the terminal consumption of spinning and weaving clothing in 2016 has already been mentioned above: the retail of spun apparel terminal is stable / the finished goods of spinning and weaving products are low.

(2) the current terminal consumption of spinning and weaving clothing is different from that of the zhengmian in 2016. The high level of leverage and high housing prices are the core reasons for the suppression of the consumption of spinning and clothing terminal. This is explained in detail in the earlier study of the core factors behind the Zheng Mian crash, which is not repeated here. Simply recalling and comparing the current and the end of April 2016 textile consumption / residents leverage rate can be drawn from the intuitive conclusion (see Figure 4, 5), compared with the relative stability of the current, compared with 2016, the current poor consumption of spinning clothing terminal is not a bit of a bit, especially with the terminal consumer interest related job market situation is even more different.


3, the terminal consumption sluggish brings the pressure of the above several links of cotton spinning industry chain history rare.

At present, the cotton spinning industry is taking the initiative to go to the inventory cycle. The current active inventory cycle is based on the continuous reduction of cotton yarn and cotton production, that is, the output is decreasing, and the stock is still increasing. This situation is extremely rare, reflecting the continuing weakness and the market wait-and-see degree of the initial terminal demand.


Four, why the Fed's monetary easing cycle will not bring Zheng cotton rebounding in the short term?

1. In April 2016, the sharp rise of Zheng cotton, as mentioned above, is the result of the lagging effect of global monetary easing, which overlapped with the rise of overall commodity resonance caused by China's supply side reform.

2, for the moment, as the US economy continues to weaken, the Fed's interest rate cut is expected to strengthen, but even if the Fed enters substantial monetary easing (interest rate cuts), it will be difficult to continue to boost risk appetite and stimulate commodities such as Zheng cotton.

(1) as a whole, 1980s has started to the present. The opening of the US Federal Reserve's interest rate cycle corresponds to the top and bottom of the US stock market, behind which is a significant decline in the US GDP year-on-year growth rate. The labor market, including unemployment rate, non-agricultural employment and so on, is expected to deteriorate along with the weakening of these data. That is to say, it can not be because of the current and future US alliance. The interest rate cut is expected to be strong, and the risk appetite in the future will go up sharply or continuously. The greater possibility is that the US Federal Reserve will cut interest rates further in the future as the US economic data weaken constantly. This will lead to the intermittent rise of risk appetite, which will stimulate commodity prices, but will be very short, because the rate of interest reduction is even at the beginning of the rate cut cycle. It will not withstand the slowdown in the US economy, which will continue to suppress risk appetite and risky asset prices, including commodities.


(2) return to commodities. From the chart below, we can see that when the Federal Reserve's interest rate reduction cycle corresponds to the global economic slowdown / weakness, commodities will not perform well during the start or even run of the Fed's rate cut cycle. In the future, with the Federal Reserve's substantial easing (short-term interest rate cuts and longer future expansion), other global economies will become wider. From the current point of view, the latest Australian interest rate cuts, as well as the interest rates cut by New Zealand, Malaysia, Philippines and India, have all started to point to this trend. The global monetary easing will provide better support for the emerging markets. That is to say, the systemic risk of emerging markets is unlikely to break out. Coming from the US monetary tightening cycle along with the strengthening of the US dollar, that is to say, relatively good global monetary easing has certain support for emerging markets, although the high debt of emerging markets and even global enterprises will make the current global monetary easing stimulate the economy to a great extent. That is to say, the risk appetite of global monetary easing brings intermittently rising and rising. Relatively weak market stability (emerging market is an important commodity demand side) will bring a certain stage of support for commodities, but the weakness of the global economy as a whole, especially the weakness of China's economy, a pole in the future, the US economy is expected to accelerate downward will make the commodity can foresee the future continuous action can be seriously insufficient, cotton is no exception.



If in the short term, in order to stabilize the cotton prices, the policy makers will introduce policies to save the market (but the probability is relatively small). If the policy is promulgated, the speculative funds will buy Zheng cotton in the very short term after the policy comes out, and the spot price of cotton will also stabilize, and the price of cotton yarn and grey cloth will be relatively stable. But because of the poor demand of the terminal, the middle and lower reaches of the textile mill and the grey fabric factory will face the high cotton. Price and terminal demand weak double-sided attack, the whole industry chain will be worse than today!! In particular, once the weather in the main cotton producing areas of the world does not change drastically, the next year's global cotton production will add to the slowdown of the US economy and the weakness of the global economy. The price of cotton will go down. China's stable cotton prices will not only bring about the stability of the industrial chain, but will also further reduce the competitiveness of the cotton yarn and grey cloth in the middle and lower reaches. Many market participants called on the national rescue market to be difficult to understand. This narrow sense of linear thinking: that is, as long as the cotton price is stabilized, the price of cotton yarn and grey cloth is stabilized, and the ideal state of the downward trend of the industrial chain will not appear. It will add frost to the whole industry, and give the short sellers a better chance to sell short and sell short.

Therefore, from the angle of trading: if there is any policy to rescue the market or stabilize cotton prices in the short term, it will be difficult to continue, and the policy of round storage or stagnation will still be introduced. First, we should make short profits of the cotton mill, that is, sell cotton yarn to buy Zheng cotton futures, and then sell Zheng cotton with the rise of Zheng cotton.

As for when to buy Zheng cotton in the future, it is not to see the specific price, but to see signs of improvement in the industrial chain, especially the signs that the current round of active inventory acceleration has emerged. This is based on our own first-line industry research. If this signal occurs, even when the price is higher than the present, it will also buy, and the industry will still be fermented at present, and it will not be considered. In the near future, MYZ has certain uncertainty. After the temporary closure of Zheng cotton air, the MYZ will continue to pay close attention to the progress of the industry and the industry situation in the near future.

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