May 3, 2012

 

China's April futures market transactions fall 20%

 

 

China's futures market still saw a trading volume drop in April but sector insiders believe the futures transactions will slowly rise in the coming months given better market sentiment and futures exchanges' stimulus measures.

 

China's futures market shrank in both transaction volume and value in April, with the trading volume down 21.49% to 64.09 million lots and the trading value down 13.24% to RMB9.49 trillion (US$1.5 trillion), according to the China Futures Association.

 

In the first four months, the trading volume of China's futures market totalled 263.07 million lots, valued at RMB41.20 trillion (US$6.5 trillion), decreasing 17.33% and 7.56% from the same period of last year.

 

Affected by disappointing economic data from China and the US, and rekindling worries over the Europe debt crisis, China's futures market maintained a weak trend last month, with the majority of listed products falling into negative territory. Against such a backdrop, investors exhibited strong wait-and-see sentiment and were reluctant to enter the market.

 

Although the country's four futures exchanges all witnessed a fall in trading volume and value last month, the open interest of China's futures market, especially the commodities contracts, rose sharply by the end of April on an on-month base.

 

Total positions of the Zhengzhou Commodity Exchange and the Dalian Commodity Exchange, the exchanges that mainly list agricultural products, respectively jumped 21.4% and 24.75% from the preceding month. Open interest of the China Financial Futures Exchange dipped 2.83% on-month by the end of April.

 

Compared with trading volume, the open interest is a better indicator to reflect investors' willingness to participate into the futures market. The rise in futures market positions indicates that more institutional investors and industrial customers have participated into the domestic futures market.

 

Industry insiders predict that China's futures market will halt the bearish movements in May with positive cues from the global economy and the central banks' measures to boost liquidity.

 

Meanwhile, the domestic futures exchanges will adjust down commissions in June, which is expected to increase market trading.

 

The domestic four futures exchanges have made frequent moves to increase futures market activity. The Shanghai Futures Exchange (SHFE), the Dalian Commodity Exchange, the Zhengzhou Commodity Exchange (ZCE), and the China Financial Futures Exchange announced that they would reduce commission by 12.5% to 50% from June. The SHFE started to lower some listed products' trading margins and daily limits after the May Day holiday (April 29-May 1). The ZCE also began to remove commission charges for the opening of sugar contracts from April 5.

 

Besides these developments, the domestic futures market is embracing the launch of silver futures. In the meantime, futures exchanges continue to step up preparations for listing crude steel, bonds, Hushen 300 stock index options, glass, rapeseed, rapeseed meal, potatoes, eggs, and pork.

 

Furthermore, many institutions forecast that China's economic data for April will continue to recover, which is expected to further ease market worries over the economic situation in the second quarter.