Saturday, December 26, 2015

China's shfe silver futures contracts expected to have impact onglobal market - CNC Machining Parts

MUMBAI (MINEWEB) - In a move that will make the silver market more liquid, theShanghai Futures (SHFE) has begun trading in silver contracts. Thecontracts are expected to be bullish for silver prices, withtraders stating that it could make market manipulation moredifficult. Although the country is a main producer and consumer of silver, ithas remained on the sidelines in silver trading. By initiatingsilver futures, traders say China clearly wants more control overthe precious metal's pricing policy punching machine. Chinese investors have been showing an increasing interest in thewhite metal amidst surging inflation and the sluggish performanceof the stock and property markets. In March, about 134 billion yuan($21 billion) in silver contracts were traded, more than 15 timesthe amount traded two years ago. More than gold, many retailinvestors prefer silver because the minimum requirement forinvesting in it is much lower in China. The white metal is imbedded in the Chinese psyche. For long, it hasbeen the basis of China's currency. In 1935, the Shanghai-basedbiweekly Finance and Commerce reported personal hoards of theprecious metal at 1.27 billion ounces.

With the Shanghai Futures Exchange gaining approval to begintrading silver futures, traders insist a significant shift appearsto be in the making. Wang Ruilei, an official with precious metals trader CGS Companytold newswire agencies that the market would be bigger and moreliquid with the advent of the futures contracts. Traders added thefutures exchange would provide direct access to silver for Chineseinvestors. It would also be beneficial to silver enterprises and industries asthe metal would now be available for trading, hedging and buying attheir local exchange and in the local currency. Huo Ruirong, vice manager of the Exchange was quoted by newswiresas saying that the new trading option would provide China with apricing mechanism on silver and help readjust the silver industrystructure. This is at a time when China is believed to have exceeded Peru andMexico to become the world's leading producer of silver. Thecountry is also the second-largest consumer of the precious metalafter the United States. It is also, of course, now the world'sleading producer of gold too. Regulators in China are hoping to see more than just investorsbenefit from this new trading vehicle. At the inaugurationceremony, Liu Xinhua, Vice Chairman of the China SecuritiesRegulatory Commission, pointed out that this year, they were keento implement the spirit of Premier Wen Jiabao's 2012 missive to"secure introduction of busbar punching machine...commodity futures and financialderivatives, in order to enhance our overall competitiveness andmeet the real economy needs to provide more tools andinstruments'. He said the silver futures market would be conducive to optimisingthe silver price formation mechanism and provide low-cost,efficient means of risk management. Liu Xinhua stressed that the silver futures play, from the listingto mature and play features, would require a gradually cultivatedstance, and was no overnight decision. He added the move would helpthe Shanghai Futures Exchange strengthen market surveillance andeffectively guard against market manipulation and other illegalactivities. INVESTMENT INTEREST Investment in silver has been booming in China. An early indicationwas the trading volume of silver forwards on the Shanghai GoldExchange, China's only exchange for the precious metal, whichsurged 751% in 2010 as compared to a year earlier. Also, the volumein September last was more than six times that of the same periodin 2010. There already has been a marked increase on the Shanghai GoldExchange, where the silver turnover has soared, averaging about1,300 metric tonnes daily. In a briefing to its clients last week,Union Bank of Switzerland (UBS) said it was a notable improvementas this was the first time since December last year that thefive-day moving average volume was consistently above 1,000 tonnesfor nearly two weeks. UBS told its investors that the additional platform for tradingsilver in China, with the silver exchange, could well haverekindled investor interest, offering the possibility of arbitrageopportunities, particularly given the added incentive of relativelycheaper margin requirements on the exchange. Data showed on the first trading day of the exchange, the benchmarklisting price was $979.77 per kilo ($30.47 an ounce). According tostatistics released by the Exchange, the first batch of eightlisted futures contracts received the accumulative amount of349,100 hands (contracts). The contracts are to be traded in yuan. The price fluctuation isset to be limited to 5% per day, while the minimum marginrequirement is 7% of the contract value. By the end of the firstday, the daily transaction volume was about 260,000 hands. Commodity futures exchanges transaction data found that silverfutures turnover has risen over the past 2 weeks and is just behindcopper trading. Commercial banks are also said to be getting in on the act. In August last year, Industrial and Commercial Bank of ChinaLimited, China's biggest lender, launched paper silver trading forindividual investors.

 Other banks followed suit. The trading volumeof Industrial paper silver products reached 300 tonnes within sixmonths, almost four times the figure for the whole of 2010. Though Barclays Capital had earlier noted in a research note thatsilver prices are to remain volatile, and that Chinese silverimports were down about a third for the year up to April, traderssaid Shanghai futures trading could mean additional investmentdemand for silver, in a similar manner to investor interest ingold. This would also initiate movement from some Chinese concerns whoare keen to pick up silver projects and companies abroad, as theyhave been doing with gold deposits and companies, said traders. SUBSCRIBE to's free daily newsletter now. We are high quality suppliers, our products such as , for oversee buyer. To know more, please visits .
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