China’s commodity frenzy spurs new crackdown from exchanges
Exchanges announce higher fees, reduction in night hours, adding to a raft of moves this month that have made it more expensive for investors to trade
Beijing: China’s commodity exchanges stepped up efforts to curb speculation in trading in everything from steel to iron ore and coking coal after prices soared amid a credit-fuelled binge. Futures slumped on Wednesday.
Bourses in Dalian, Shanghai and Zhengzhou have announced further measures, including higher fees and a reduction in night hours, adding to a raft of moves this month that have made it more expensive for investors to trade.
Goldman Sachs Group Inc said this week it was concerned about the surge in speculative trading in iron ore, adding daily volumes were so large that they sometimes exceed annual imports.
Ore prices have surged 34 per cent this year in Dalian, while steel reinforcement bar is up 39 per cent in Shanghai. Morgan Stanley said the spike in speculative trading had stunned global markets, citing a jump in activity for eggs, garlic and cotton as well as iron ore and steel.
The explosive growth in trading has stoked concerns that the frenzy was triggered by a credit-fuelled surge in liquidity echoing the stock market bubble in 2015 and is destined for a similar bust, according to Zheng Ge, analyst at CEFC Wanda Futures Co. China’s investors have been honing in on raw materials amid signs of a pickup in demand after policy makers talked up growth, added stimulus and the property market rebounded.
Iron slump
Among the latest changes, the Dalian exchange raised trading fees for iron ore, coking coal and coke, while Shanghai said it would increase margin requirements for steel reinforcement bar and hot-rolled coil, and shorten trading hours. The Zhengzhou exchange raised trading charges and margin requirements for some commodities.
Iron ore futures plunged 4.1 per cent on Wednesday, extending their decline in the past four days to 8.9 per cent. Steel reinforcement bar lost 3.2 per cent and coking coal slid 4.6 per cent as prices responded to the exchange moves.
“We’re trying to clampdown firmly on the trend of excessive speculation in some commodity trading,” the Dalian bourse said in a statement. “We’ll be highly vigilant and adopt further measures if necessary.”
