Wednesday: China soy futures settle down after bank reserve rate hike

 

 

Soy futures traded on the Dalian Commodity Exchange settled lower Wednesday due to concerns that the central bank is likely to issue more tightening measures after raising the reserve requirement ratio for banks.

 

The benchmark September 2010 soy contract settled RMB87, or 2.2%, lower at RMB3,917 a metric tonne.

 

The contract opened 2.5% lower at RMB3,905/tonne, but recovered some of the ground lost during the morning session.

 

The People's Bank of China said late Tuesday that banks will have to increase the share of deposits they park at the central bank by 50 basis points.

 

"The (timing of the) hike was completely outside of expectations, and had a swift impact on the market," said Hu Shengming, an analyst with Tianqi Futures.

 

But analysts don't expect the move to have a lasting effect on the market, as the 50-bp hike will probably pull only RMB200 billion-RMB300 billion from financial markets, far less than the RMB7 trillion of new yuan lending generally expected by the market for this year.

 

Agricultural products will continue to be supported by government buying and other supportive policies, Capital Futures analyst Dong Shuangweian said.

 

The tightening signal gave the market an excuse to take profit on earlier gains, but agricultural products will continue to be supported by government buying and other supportive policies, so bargain hunters came in after the initial drop to bring prices off lows, Dong said.

 

There is still a risk of a further move down in the near term, however, as overseas markets may not have concluded a correction, some analysts warned.

 

The Chicago Board Of Trade benchmark January soy contract is likely to test $9.50 per bushel, after ending 32 1/4 cents lower at $9.69 1/4 overnight, said Liang Yong, an analyst with Galaxy Futures.

 

Trading volume of all soy contracts declined to 311,972 lots from 458,026 lots Tuesday.

 

Open interest fell 8,034 lots to 322,768 lots Wednesday.

 

Corn, soymeal, palm oil and soyoil futures all settled lower.

 

Following are Wednesday's settlement prices in yuan a metric tonne for benchmark contracts and volume for all contracts in lots (One lot is equivalent to 10 tonnes):

 

              Contract     Settlement Price  Change     Volume

Soy         Sep 2010      3,917        Dn   87    311,972

Corn        Sep 2010      1,889        Dn   24    238,872

Soymeal  Sep 2010      2,878        Dn   78    982,434

Palm Oil   Sep 2010      6,820        Dn  226    555,670

Soyoil      Sep 2010      7,516        Dn  214    769,806