Shanghai - Commodities traded in China are collapsing along with the country’s stock market.
Raw materials from silver to lead and sugar to eggs fell to daily trading limits as the Shanghai Composite Index crashed to a three-month low Wednesday. A raft of measures to stabilise equities is failing to stop the bear-market rout in the country’s stock market, which had lured a record number of amateur investors and grown to become the world’s second-largest outside the US
“People are selling everything in sight to get their hands on cash,” Liu Xu, a trader at private asset-management company Guoyun Investment in Beijing, said by phone. “Some need to cover their margin calls in the stock market while others are gripped by fear that the Chinese economy will be affected by this crisis.”
Commodities prices globally this year have cooled, in part on slowing economic growth in China, the world’s largest consumer of energy, metals and grains. The Bloomberg Commodities Index, which tracks 22 raw materials, is down 7 percent so far this year. The gauge has lost 4.6 percent in the last three days, the most since 2011.
Even as sentiment had soured on speculation demand is weakening, Wednesday’s sell off was fueled more by the rout in the country’s equity market, according to Ivan Szpakowski, a commodities strategist at Citigroup in Hong Kong.
“It’s less commodity specific, and it’s not even reflective of a deterioration in economic growth or commodity demand,” Szpakowski said. “That’s not what we’re seeing. We’re seeing a deterioration in sentiment and a spillover from the equities market.”
Metals including copper, nickel and silver in Shanghai fell to their daily down limits, while rubber entered a bear market. Steel rebar and iron ore, as well as eggs, sugar and soybean meal dropped to the lowest level allowed by their exchanges.
“Agricultural products in my view are collateral damage in this sell off,” said Liang Ruian, a fund manager at Shanghai-based Jianfeng Asset Management. “Pigs are still going to eat, so what does this stock market stampede have to do with soybean meal?”
Bloomberg