New | Chinese hedge funds in aggressive short-selling strategy in copper, other commodities

Chinese hedge funds, once again linked to a powerful sell-off in copper this week, were probably replaying an aggressive short-selling strategy they have also used to target iron ore and coal, according to industry sources.

This indicates the growing clout of the secretive Chinese funds in global commodity markets as they tap their home-ground advantage in the world’s biggest consumer of copper and other commodities.

Chinese funds such as Shanghai Chaos Investment Co and Zhejiang Dunhe Investment Co are said by traders to be behind at least three big drops in copper in a year, one in March last year when the metal fell more than 8 per cent in three days.

Benchmark copper on the London Metal Exchange fell to 5-1/2 year lows near US$5,350 a tonne this week and was facing its biggest weekly loss in more than three years at 6.4 per cent.

Other funds involved include Flowinvest China Commodities Trading, Yihui Investment and Shanghai Discovering Investment, market sources said.

"It does make you sit up and take note. But given that’s where a lot of the wealth is amassing, should we really be surprised that we are seeing this type of fund activity continuing to grow?" said analyst Robin Bhar of Societe Generale in London.