By Bloomberg News
Jan. 8 (Bloomberg) -- Commodity futures fell in China, led by zinc and sugar, on speculation the government will begin tightening monetary policy to reduce inflationary risks after a record gain in lending, reducing raw material demand.
Sugar for September delivery in Zhengzhou dropped 3.4 percent to 5,597 yuan ($820) per metric ton and zinc for April delivery in Shanghai fell 2.4 percent to 21,210 yuan a ton. Copper shed 0.8 percent to 60,690 yuan and soybean oil lost 1.5 percent to 7,744 yuan.
China’s central bank yesterday sold three-month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and limiting price gains. Prices also declined on speculation regulators may investigate futures traders as the government takes steps to curb lending.
“There has been talk that there will be an investigation into futures companies in China on the origins of their funds and this is weighing on the market,” Liu Biyuan, an analyst at GF Futures Co., said from Guangzhou. An official at the China Securities Regulatory Commission declined to comment when reached by phone today.
Traders fret that government efforts to rein in speculation may lead to investigations of futures trading firms and their sources of funds.
China’s stocks also fell, set for the first weekly decline in three weeks, as raw-material suppliers slid on lower commodity prices and automakers dropped on government tightening concerns.
‘Matter of Time’
“It’s just a matter of time before the central bank raises interest rates or reserve ratios,” said Wang Zheng, a fund manager at Jingxi Investment Management Co.
Policy makers are seeking to sustain a rebound in its economic growth, driven by fiscal stimulus and looser credit that spurred a construction boom, without stoking prices of stocks and property.
China’s three commodity futures exchanges traded record volumes last year on sustained demand for raw materials from soybeans to copper and as new contracts, including one for steel, were introduced.
A total of 2.15 billion contracts were traded in 2009 on the Shanghai Futures Exchange, the Dalian Commodity Exchange and the Zhengzhou Commodity Exchange, 58 percent more than in 2008, according to the China Futures Association. The contracts’ value exceeded 130.5 trillion yuan, 82 percent more than 2008, the association said.
Lending Curbed
China’s January lending will be curbed as the central bank this month may start directing banks on how much they can lend, according to Bank of China Ltd.
New credit may fall to less than 2.6 trillion yuan in the first quarter from 4.58 trillion yuan in the same period a year earlier, Bank of China analyst Shi Lei wrote in a note today. Banks may offer 1.2 trillion yuan of new loans in January as the central bank introduces its so-called “window guidance” to lenders, he said.
China’s central bank said this week it will target “moderate” loan growth in 2010, adding to signs that policy makers won’t allow a repeat of last year’s record expansion in credit that raised concerns of asset bubbles.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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