EFTA01468772

Subject: Fw: Copper - positive momentum from China cap mkts reform From: Tazia Smith <M > Date: Mon, 12 Ma 2014 17:01:03 -0400 To: Cc: Vahe Stepanian < Paul Morris < Rich- Copper faded only slightly - mid on Dec 7000 call is $251. morning. Thus Jeffrey's option mid is Using same vol spread (0.6%) this morning. TDS 6875 vs. 6883 spot ref this morning (LPZ4 6836) 72 at the end of the day, vs. $252/mt this $314,650 mid, vs. $315,000 mid this morning. the EOD indicative bid $299,448 vs. $300,000 (Embedded image moved to file: Tazia Smith Director I Key Client Partners pic14114.gif) - US DB Securities Inc Deutsche Asset & Wealth Management 345 Park Avenue, 10154-0004 New York, Tel Fax Mobile Email NY, USA (Embedded image moved to file: pic24742.gif) Forwarded by Tazia Smith/db/dbcom on 05/12/2014 04:31 PM From: dbcom Tazia Smith/db/- EFTA01468772 To: [email protected], Vinit Sahn Nav Gupt. Paul Morris Vahe Date: AM 05/12/2014 09:40 Subject: Copper - positive momentum from China cap mkts reform Good Morning Jeffrey - Your copper option is $300,000 bid (-$31,250 p/l), vs. ref of 6883. This is up from $239,583 as of Friday. Research and desk commentary is below. Bid as of 9:20am 5/12, 3m spot ref 6883, $240/mt. This compares to mid of $252/mt with 0 vol, $240 represents 0.6% vol (0.75% standard, tightened it). Vega on the option Vega = $20.27/mt. 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 China on 5/9. DB 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) mobilize massive private savings; b) encourage inward portfolio flows; and c) lift market sentiment and valuation." From Matt's team: "Copper 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 financing trades. Indeed it is expected that use of SPVs will be come increasingly EFTA01468773 difficult. This should be bearish for copper after the regulation is passed. Meanwhile, we think that before the regulation is passed, people are trying to secure as much copper-backed financing as they can, which has resulted in a scramble for copper, and a spike in price. I would further qualify and say that the news announcement has not resulted in a scramble for physical copper yet, but an expectation for the scramble, which itself is sufficient to spike up the price. " (Embedded image moved to file: pic18162.gif) Forwarded by Tazia Smith/db/dbcom on 05/12/2014 09:22 AM From: Amy Tan/db/- To: Date: AM Subject: reform 05/12/2014 06:08 DB China unveils agenda for comprehensive capital market Deutsche Bank - Fixed Income Research EFTA01468774 Data Flash - China unveils agenda for comprehensive capital market reform 11 May 2014 (2 pages/ 81 kb) Download the complete report: http://pull.db-gmresearch.com/p/1797-5558/51224393/- DB DataFlash 2014-05-11 09 00b8c088419cdO.pdf 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 Nine 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 thirty-three areas are specified, signaling the unprecedented resolution of Chinese 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 restructuring. From macroeconomic perspective, we highlight the below reforms: EFTA01468775 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 opening up the capital markets, with an aim to facilitate the cross-border investment and financing activities. Both inward and outward investment quotas under QFII and QDII programs will be increased. The shareholding limits for foreign capital in listcos will be relaxed. Domestic capital market will be steadily opened up for the direct investment of foreign individuals, and the domestic individuals investing in foreign capital market will be orderly pushed forward. Moreover, Xiao Gang, chairman of CSRC said this March that the potential QFII expansion is huge, and he mentioned that CSRC has been working on the QFII tax policy with other government agencies, as part of the effort to help facilitate QFII expansion this year. We believed that this proposal will help inject more liquidity into China A share market, as well as expedite China's progresses in capital account liberalization in a boarder sense, including a) further relaxing the foreign investment management like holding period and remittance; 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 SHFTZ and developing a domestic RMB offshore market; EFTA01468776 d) permitting cross-border RMB remittances by individuals and broadening channels for offshore banks to borrow/lend RMB in domestic market. 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 includes three major areas of bond market, equity market and private equity. On bond market, the Guideline aimed to a) develop a scheme of local government bond 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 well as 6) promote asset securitization. To develop a multi-layered equity market and cultivate a healthy private equity market are other two major areas in promoting the direct- financing. In A share stock market, the approval-based stock issuance system will be replaced by a registration-based one, and such move will be accompanied by the new IPOs governing rules published by the Securities Association of China the same day of the Guideline. Regulators will crackdown insider trading, enhance information disclosure, improve delisting regime, and support pension funds investments into capital markets by preferential tax policies. EFTA01468777 The State Council also said it will foster the market for private equity funds 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. According to CSRC, 42.3% of financing in China belonged to the direct-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 financing 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 funding 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 inward portfolio flows; and c) lift market sentiment and valuation. Promoting mixed ownership EFTA01468778 reform Echoing the on-going SOE reform, the statement a mixed ownership economy, to improve and corporate governance structure, and Specifically, it encouraged the employee of different ownership. Entry private companies will be further removed. said to "actively" develop the modern enterprise system to promote equity transfer. stock ownership as well as M&A among companies barrier and acquisition restriction on In our view, the mixed ownership reform is the key for China reform package on corporate level, which will 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 2014, 62% of all Chinese listcos' market cap was SOEs either central or local ones, while private-owned only accounted for 38%. Among listed SOEs, 54% operated in monopolized sectors like oil & gas, banking, telecom and transportation, 42% operated in competitive sectors like food & beverage, auto, equipment, etc. Going forward, we expect 1) more monopolized central SOEs, in oil & 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 listcos. More details of this reform will be elaborated in the upcoming SOE reform plan. EFTA01468779 Managing a balance between innovation, development and financial risk prevention While encouraging the innovation and modernization in China capital market, the authorities still 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 line 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 will 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 EFTA01468780 Audre Shi (Embedded image moved to file: pic26037.jpg)Deutsche Bank's award - winning research - now available on iPad. Autobahn on the move. https://filestore.xmr3.com/142927/11724380/shared/- Deutsche Bank has launched Autobahn Mobile.pdf Deutsche Bank's award-winning research - now available on iPad. Autobahn on the move. https://filestore.xmr3.com/142927/11724380/shared/- Deutsche Bank has launched _ _ _ Autobahn Mobile.pdf Click/ copy this link into a browser to access the report: http://pull.db-gmresearch.com/p/1797-5556/51224393/- DB_DataFlash_2014-05-11_09 00b8c088419cd0.pdf. If you have any difficulty accessing the report, please forward this email with the word 'PDF' in the subject line to [email protected]. After 90 days you can access the report on our web site: http://- gm.db.com. You have received this mail because you have subscribed to Geography: Asia-Pacific (EM), Discipline: Economics, Type of research: General For changes to your current research subscription, visit https://gm.db.com/rsm or email EFTA01468781 [email protected]. Please refer to the applicable legal disclaimers in the full report. Mail Reference:0900b8c088419cd0/- EFTA01468782