China’s commodities futures tumbled today with cotton, sugar and rubber falling by the daily limits on speculation China may take additional measures to curb inflation by lifting interest rates again and selling from reserves. Copper, zinc and soybeans also slid.
Cotton for May delivery on the Zhengzhou Commodity Exchange fell by the 7.5 percent limit to 29,290 yuan a metric ($4,418) and was at that level by 2:08 p.m. local time. The contract gained to a record 33,720 yuan on Nov. 10. Sugar for September delivery declined by 5 percent to 6,895 yuan a ton. It reached an all-time high of 7,521 yuan on Nov. 9.
Consumer prices in China jumped 4.4 percent in October, the fastest pace in two years, the statistics bureau said yesterday. The government has sold aluminum, zinc, sugar, cotton and corn this year in an effort to ease supply shortages and curb price gains. Commodities outside China also slumped today.
“The recent tightening including the reserve ratio hike this week fueled more expectation that China will accelerate the pace it increases interest rates,” Tian Feng, analyst at BOC International (China) Ltd., said by phone from Shanghai.
The People’s Bank of China boosted its benchmark one-year lending rate on Oct. 19 by a quarter of a percentage point to 5.56 percent, the first increase since 2007. The central bank may raise interest rates within weeks after the latest inflation number accelerated to the fastest pace in 25 months in October, a Bloomberg News survey of economists showed.
More Sales
“The government already sold stockpiles of cotton, sugar, aluminum and zinc, and there’s speculation that it may do more to suppress prices and contain inflation,” Tian said. “There’s also market speculation that the government may sell additional sugar stockpiles, as well as soybean stockpiles.”
Soybeans for September delivery dropped the 4 percent limit to 4,584 yuan a ton on the Dalian Commodity Exchange and palm oil slipped 5 percent to 9,154 yuan.
Copper and zinc on the Shanghai Futures Exchange slid the 5 percent limit to 65,640 yuan a ton and 19,935 yuan, respectively. China sold 49,992.97 tons of 50,000 tons on offer from state reserves through auctions on Nov. 9 at below-market prices. Rubber for May delivery dropped 5 percent in Shanghai to 35,790 yuan a ton.
The People’s Bank of China on Nov. 10 ordered an increase in bank reserve requirements by 50 basis points from Nov. 16, the first nationwide increase since May. Some lenders, including Bank of Communications Co., have to increase their reserve ratios by an additional 50 basis points from Nov. 15, a person with direct knowledge of the matter said yesterday.
Rate Speculation
“There’s talk of an interest-rate hike over the weekend,”said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “It’s quite possible given how inflation has accelerated.”
Prices of global commodities also slid today, with cotton in New York tumbling as much as 3.6 percent to a daily limit of $1.3418 a pound. Zinc tumbled by the most in two months and copper dropped from a record on the London Metal Exchange.
Rubber in Tokyo slumped from a 30-year high. April-delivery rubber on the Tokyo Commodity Exchange declined as much as 4.3 percent to 362.8 yen per kilogram ($4,402 a metric ton).
(bloomberg.com)
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