EFTA01172565.pdf

From: Tazia Smith 4..a , To: jccvacation®gmail.com Cc: Vinit Sahni , Nay Guptiat i l . Paul Morris Vahe Stepanian Subject: Copper - positive momentum from China cap mkts reform Date: Mon, 12 May 2014 13:40:04 +0000 Inbar-Images: unnamed; unnamed(' ) Good Mornay Jeffrey - Your copper option is 5300.000 bid (431,250 pfi). vs. ref of 6883. This is up from 5239,583 as of Friday. Research and desk commentary is below. Bid as of 9:2Oam 912.3m spot ref 6883, 524O/mt. This compares to mid of $252/mt with 0 vol. 3240 represents 0.6% vol (0.75% standard. tightened it) Vega on the option Vega = $2O.27/m1 Source: DB Commodities Trading. 5/12/14 As you know. China announced its New National Nine Rules' (in contrast to the earlier 'National Nine Rules' issued in 2004). which outline meaningful changes to increase open- ness in Capital Markets out of Chita on 5/9. OB research summary below. bottomline takeaway: "Under such endeavor. China capital markets will be much more diverse. structured and transparent in the future. and will a) mobeze massive private savings: b) encourage inward portfolio flows: and c) lift market sentiment and valuation? From Matfs team: Topper is a popular choice for use as collateral in financing trades. Now China is proposing that local governments would be able to issue bonds rather than rely on. among other things. using copper as collateral for financng trades. Indeed it is expected that use of SPVs will be come increasingly difficult. This should be bearish for copper after the regulation is passed. Meanwhile. we think that before the regulation is passed. people are tryng to secure as much copper-backed financing as they can, which has resulted n a saarnbte for copper. and a spike in price. I would further qualify and say that the news announcement has not resulted n a scramble for physical copper yet. but an expectation for the scramble, which itself is sufficient to spike up the price.' 5/12/2014 Live Description Trade Date Expiration Notional Cost Basis filfrM• MM. P/L USDJPY Triple One-Touch 101Call• 11/21/2013 11/20/2014 1,000000 USD PS - $ µ.865) $ 1428% Dec14 Copper 7000 Call" 4/7/2014 12/3/2014 1,250 metrictons $331,250 $ 300,000 $ (31,2$0) r $331,25O 5295,135 S (36.115) • Not a bid/offer. Mid Mark-to-Marke as reported on client's D8 Valuation Statement. •• Bid as of 9:2Oam 5/12, ref 6883, $24O/mt ($2520 vol mid, $240 represents 0.6% vol, vega on the op ion Vega = $2O.27/mt). Source: DB Commodities Trading, 5/12/14 -- Forwarded by Tata seuvatodocom on 0602,2014 o322Mi.-- From. Amy TerkrawdeboaccecoEx To 09122014 041•00 AN Subject morn unite agenda 1w call:COMMA. faratAl Marta MIMI Deutsche Bank - Fixed Income Research Data Flash - China unveils agenda for comprehensive capital market reform n for 2014 I2 rosin, in finwelnad the ennatughail On May 9. the State Council of China issued the 'Guiding Principles for the Healthy Development of Capital Markets'. which layouts the detailed roadmaps of China's future capital market development in nine major areas. including overall requirements. stock market. bond market. private equity, futures market. the competitiveness of the securities and futures sector. capital market openness, financial risks and market regulation. The policy is also referred as the 'New National Nile Rules', in contrast to the earlier 'National Nine Rules' issued in 2004. Under the nine broad guidelines, details on the directions and goals of reforms for thrty-three areas are specified. signaling the unprecedented resolution of °Mese government to push forward the comprehensive capital market reforms. It is government's aim to establish multi layer capital markets. enlarge corporate and household investment channel, encourage efficient capital allocation as well as promote the economic restructurng. From macroeconomic perspective. we highlight the betas reforms: Further opening up China's capital markets Following the recent announcement of Shanghai-Hong Kong Stock Connect Scheme on Apr 10, the Guideline again emphasizes on openly up the capital markets. sift an aim to facilitate the cross-border investment and financing activities. Both inward and outward investment quotas under OFII and ODII programs will be increased. The shareholdry Units for foreign capital in balms will be relaxed. Domestic capital market will be steady opened up for the direct investment of foreign MO/duals. and the domestic individuals nesting n foreign capital market will be orderly pushed forward. Moreover. Xiao Gang. chairman of CSRC said this March that the potential OFII expansion is huge, and he mentioned that CSRC has been working on the OFII tax policy with other government agencies. as part of the effort to help facilitate OFII expansion this year. We believed that this proposal yell help inject more liquidity nto China A share market, as well as expedite China's progresses in capital account liberalaation in a boarder sense. including a) further relaxing the foreign investment management Me holdrog period and rerMtance: b) implementing and expanding the Stock Connect scheme (see our Apr 11 note 'A leap in China's efforts to liberalize capital accounts"): c) establishing capital account convertibility in SHFT2 and developing a domestic RMB offshore market: d) permitting cross-border RMB remittances by individuals and broadening channels for offshore banks to borrow/end RMB in domestic market. EFTA01172565 Promoting direct-financing To develop a multi-layer capital market with proper structure. complete function and effective regulation by 2020. the Guideline highlighted the development of direct financing. which indudes three major areas of bond market. equity market end private equity. • On bond market, the GuideVie aimed to a) develop a scheme of local government bon] issuance: 2) enrich bond products suitable for various investors: 3) develop bond types for SMEs: 4) connect different bond exchanges and 5) improve issuance procedure. rating mechanism as wee as 6) promote asset securitization. To develop a multi-layered equity market and cultivate a healthy private equity market are other two major areas as promoting the crect-financing. • In A share stock market the approval-based stock issuance system will be replaced by a registration-based one, and such move we be accompanied by the new IPOs goveming rules published by the Securities Association of China the same day of the Guideline. Regulators will crackdown insider trading. enhance information disclosure. improve deleting regime. and support pension funds investments into capital markets by preferential tax policies. • The State Cocricil also said it will foster the market for private equity hinds and venture capital funds. Going forward, the placement of private equity won't be subjected to administrative approval and funds of private equity and venture capital will be encouraged to support SMEs and newly-emerging industries. We believe that such reforms will substantially help to improve financial stability and capital allocation in China. Accordrog to CSRC. 42.3% of financing in China belonged to the cerect-financing category by end of 2012. lower than that of developed economies like the US (87.2%). Japan (74.4%). Germany (69.2%) and emerging markets like India (66.7%) and Indonesia (66.3%). As a result. risks are highly concentrated in banking system. And Wianclig is expensive and hard to access for small borrowers. We expect that the reforms of promoting direct-financing will help enrich the investment channels for individuals and corporate. disperse risk in financial system. meet financing needs of SMEs and lower the funclog cost for them. Under such endeavor. China capital markets will be much more diverse, structured and transparent in the future, and will a) mobilize massive private savings: b) encourage award portfolio flows: and c) lift market sentiment and valuation. Promoting mixed ownership reform Echoeig the on-going SOE reform, the statement said to 'actively' develop a mixed ownership economy. to improve the modem enterprise system and corporate governance structure. and to promote equity transfer. Specifically, it encouraged the employee stack ownership as well as M&A among companies of different ownership. Entry Denier and acquisition restriction on private companies a be further removed. In our view. the mixed ownership reform is the key for China reform package on corporate level. which wel help enhance SOEs performance. unleash potential of private companies, better allocate resources as well as boost economic potential growth. According to our calculation, by Feb 20t4. 62% of al Chinese listcos market cap was SOEs either central or local ones. while private-owned only accented for 38%. Among listed SOEs. 54% operated in monopolized sectors like oil & gas. bankieg. telecom and transportation. 42% operated in competitive sectors like food & beverage. auto, equipment. etc. Gong forward, we expect 1) more monopolized central SOEs. in cd & gas. telecom and transportation. to open up for private capital investment with minority shares: 2) large chunk of local SOE shares in competitive sectors like F&B. apparel. electrics and healthcare will be taken over by private capitals: 3) more local SOEs assets to be listed or injected into lestcos. More details of this reform wal be elaborated in the upcoming SOE reform plan. Managing a balance between Innovation, development and financial risk prevention While encouraging the innovation and modernization ki China capital market. the authorities Mil keep the financial stability as paramount. Risk control, monitoring. reporting and disposal will go side by side with financial market evolvement. And most importantly. the bottom one of 'no systemic or regional risk' will be firmly held. as per the Guideline. The policy also requires good management on the relationships of market vs. government and investors at their own risk vs. investor protection. Investors should have a rational investment principle, awareness of risks. responsible for their actions and self-protection ability. Regulators WA provide investors. especially small investors. the rights to know. to participate. to appeal and to supervise. The statement is in line with the 'orderly default' concept proposed by regulators in regard of trust market and other shadow banking market risk. Lin Li Audrey Shi Autobahn A. r.rho Bank's award winning Mobile Click ten foe morn :odium:loon Autobahn on the move p[bowy the hit inlo a bonen: to ncones Inn report F PYIMrr la yam .( II you none any Onicuky Knew° Po newt PhOoe foreen1Ine email wile the won PDF intro suthcol Ina to faaaavjaagalg000ralo vin. Neat 90claysyou con access the topwl on our wet sic upattassa You hays recolvalMs mei Cameo you ha., suescribef fa Geography: Asia:Pao/1c (EM). museum Economics. Typo of research: General For [tomes lo nor owned rowed, et:linnet:on vetamy_rgmdt tom mno. ems, CARonsan, nunsurnoreihdo awe Please !ebb to applicable legal declernen nee ehreowl. This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. EFTA01172566