Steel product futures draw keen interest in mock trading session
Investors showed keen interest in simulated trading of steel wire and screw steel futures started by the Shanghai Futures Exchange yesterday, a sign that the widely used material will receive a warm response when officially launched.
Brokers predicted prices of the steel products would rise when the contracts hit the market - anticipated at the end of this month - because the mainland's stimulus packages are increasing demand.
The Shanghai futures bourse, the largest of the three commodity exchanges on the mainland, started testing the trading system for the new contracts yesterday, which were expected to be launched on March 27, brokerage sources said.
The exchange received final approval from the China Securities Regulatory Commission this week to launch steel wire and screw steel contracts.
Thousands of brokerage accounts have been opened in the past few weeks as individual and corporate investors embraced the steel contracts, sources said.
'People are showing keen interest in the commodity after the drawn-out preparations for trading,' said Yongan Futures Brokerage analyst Huang Lei. 'The government's plans to expand investment to lift the economy fuelled buying interest.'
Hundreds of thousands of contracts changed hands during yesterday's trial trading session, and analysts said the volume would likely swell during the official debut since the threshold for steel contracts is lower than those for existing commodities.
Traders are required to deposit 7 per cent of the contract's value, for which the exchange has defined lots at a relatively low 10 tonnes each.
'It will be more or less a game of psychology since people have high expectations for steel prices,' said Guotai Junan Futures Brokerage analyst Shu Chao. 'But a price increase seems likely during the trading debut.'
Yesterday, screw steel futures settled at nearly 3,500 yuan (HK$3,970) per tonne while steel wire closed at about 3,400 yuan. Both closing prices were slightly higher than those on the spot market.
Beijing has spent three years preparing for the launch of steel futures and regulators hope trading will avoid wild fluctuations amid the economic slowdown.
The mainland was also preparing to launch rice and pork futures on the Zhengzhou and Dalian commodity exchanges in the first half of this year, industry officials said.
