China Probes Speculative Investments, Disorder in Commodity Futures Market
Yicai Global
/SOURCE : Yicai
China Probes Speculative Investments, Disorder in Commodity Futures Market

(Yicai Global) Feb. 27 -- The Chinese National Development and Reform Commission recently launched an investigation on speculative investment in the commodity futures market out of concerns about the consumer price index and the producer price index, foreign media reported today.

The NDRC is reportedly probing connections between rising commodity futures and speculation along with other activities causing disorder in the futures market. It is making inquiries at futures companies and jointly studying trends in commodity prices with securities companies. The macroeconomic regulator worries that recent rises in commodity prices may push up the PPI and the CPI.

The CPI rose 2.5 percent year-on-year and 2.1 percent month-on-month to hit a 30-month high in January, the Chinese National Bureau of Statistics said. The PPI, an indicator of wholesale prices of industrial products, hit a five-year high after a 6.9 percent surge in January.

As China toughens its crackdown on low-quality steel, speculators expect reduced supply will lead to higher prices. There have been clear buy signals on the ferrous metal market.

Steel prices will continue to see considerable volatility this year, said Qiu Yuecheng, senior analyst at Xiben New Line. "Profits of steelmakers currently stand at CNY700 (USD102) to CNY800 per ton, and their gross profits are around CNY600. Their profitability is at a very high level. Even steelmakers that stocked up before the Chinese New Year, have profits around CNY600 to CNY700."

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