Singapore - Chinese investors traded a record volume of
commodity futures last year as speculators poured in and out of the market on
bets that shortages are looming.
Combined aggregate trading volume on the Shanghai Futures
Exchange, Dalian Commodity Exchange and Zhengzhou Commodity Exchange jumped 27
percent from 2015 levels to 4.1 billion contracts, according to data e-mailed
by the China Futures Association. Turnover across the bourses rose 30 percent
to a record 177.4 trillion yuan ($25.5 trillion), the data show.
Chinese investors, flush with credit and hunting for
returns, piled into commodities futures last year, spurred by bets that the
government’s efforts to cut industrial capacity would lead to shortages of raw
materials. They charged into markets several times in 2016 and bought
everything from iron ore to cotton, driving up prices and stoking fears of a
bubble. Authorities introduced curbs on excessive speculation to quell the
mania.
“With the hope that supply-side reform will successfully
reduce overcapacity in China, especially in the country’s coal and steel
sectors, some commodities futures surged amid a trading frenzy last year,” says
Jia Zheng, trader at Shanghai Minhong Investment Management. “Price volatility
increased too because of low inventories following low prices in the past.”
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Trading volume in Chinese commodities futures has been
heaviest in the world for the seventh consecutive year, Fang Xinghai, Vice
Chairman of the China Securities Regulatory Commission, told an industry
conference last month, according to a transcript posted on the CSRC website.
In terms of turnover, the Chinese bourses probably still
lag behind international rivals. The notional value of the commodity futures
and options traded on CME Group’s exchanges in 2015 was $41.15 trillion,
according to the World Federation of Exchanges.
Chinese exchanges usually double count volumes, open
interest and turnover to reflect the long and short side of a trade, while the
China Futures Association counts only one side of transaction, which is in line
with the standards of most bourses in the world.
BLOOMBERG