November 8, 2010

China commodities advance on US stimulus

China's commodity complex moved higher on Friday (Nov 5) as bellwether futures like soy rallied on supportive Federal Reserve policy, assisted by fundamental strength in other products including cotton and palm oil.

The dollar's drastic fall took place after the US announced US$600 billion of quantitative-easing measures to stimulate the economy helped the commodity complex breach key resistance levels.

"When the quantitative easing measures were announced, the markets stabilised and some even fell a bit but the reaction overnight was overwhelmingly positive," said Gao Yanrong, an analyst with Dalu Futures.

Demand-and-supply variables weighed heavily in favour of some agricultural commodities.

September soy on Dalian Commodity Exchange was up 3.3% to RMB4, 626 (US$695) per tonne.

Traders indicated high Chinese demand and concerns over unfavourable South American weather affecting oilseed production and high seasonal festival consumption.

Demand across Asia tends to rise toward the end of the third and fourth quarters each year, with a plethora of festivals like Diwali and China's National Day, as well as restocking ahead of the Lunar New Year in the following year, an executive with Singapore-based Wilmar International Ltd said.