Tag Archives: Shanghai Futures Exchange

China Said Issuing First Gold Import Licences To Foreign Banks

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IF SHANGHAI’S GOLD futures market is to take off, it will require greater participation by foreign investors than hitherto. That in turn will mean letting more foreign investors in to the physical market. Reuters reports the first signs of that, saying ANZ and HSBC have been granted the first gold bullion import licences to be given to foreign banks. The news agency attributes its intelligence to unnamed sources. Neither bank would comment on the report, but it gains credibility from the fact that the pair were the first two foreign banks allowed to trade gold futures on the Shanghai Futures Exchange.

The People’s Bank of China said last September that it would increase the number of bullion import licences. Expanding the number of banks able to import gold to 12 from the current nine (China Everbright is also said to have been given a license) would also ease the demand pressures on the metal. The government controls import volumes with quotas. Nonetheless, last year gold imports more than doubled to at least 1,060 tonnes. As a result, China displaced India as the world’s top gold importer.

The exact volume of imports is uncertain. China doesn’t make pubic the volume of its gold imports, so we have to rely on the export volume from Hong Kong, which is the source of most of the bullion entering China. That is the number quoted above.

The constraint on supply means that physical gold usually sells in China at a modest premium to the world price. That is currently $15 an ounce, down from the $30 an ounce it reached in April and May last year. The new licences, if confirmed, won’t make much of a dent in that, but this Bystander expects more new licences for foreign banks to follow.

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Regulators Take Aim At Commodities Speculation In Anti-Inflation Drive

With inflation hitting a two-year high in September, China’s economic policymakers are taking steps where ever they can to stall the rise in prices, particularly of food and property. Securities regulators are now pushing for curbs on commodity futures trading in the hope of damping down excessive speculation (the ever-present bugaboo when commodity prices rise). The Shanghai Futures Exchange is raising its margin requirements on natural rubber contracts to 11% from 8% while the Zhengzhou Commodity Exchange has already raised margins for rice, wheat, rapeseed oil and sugar to 8% from 3% or 4%. Rice and rubber futures hit record prices this week. along with those of cotton.

The new margin requirements follow the central bank’s surprise rise in benchmark interest rates earlier this month, and a raft of measures over months and months to let down the property price bubble inflated by the liquidity the government pumped into the economy in the wake of the global financial crisis. We would expect central controls on commodities trading if the self-regulation of the exchanges fails to drive down prices.

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