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 Mineweb.com's free daily newsletter now.
We are high quality suppliers, our products such as , for oversee buyer. To know
more, please visits .
Relate Articles:
machinefinder used farm equipment
machine head tour 2015
No comments:
Post a Comment