Dalian exchange to help counter speculation

Updated: 2010-11-27 10:40

By Feiwen Rong (China Daily)

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Dalian exchange to help counter speculation

The Dalian Commodity Exchange will increase futures margins and price limits on Monday as part of a wider government crackdown on speculation and food prices. [Photo/China Daily]

BEIJING - The Dalian Commodity Exchange, where the world's largest soybean-meal and soybean-oil contracts are traded, will increase futures margins and price limits as part of a wider government crackdown on speculation and food prices.

Margins for soybeans, soybean meal, soybean oil, palm oil, corn, polyethylene and polyvinyl chloride contracts will increase to 10 percent from Monday, the exchange said in a statement.

The bourse raised the daily price curb to 6 percent, it added. Dalian's move follows similar measures by the bourses in Shanghai and Zhengzhou.

China, the world's biggest consumer of commodities, has pledged to control prices, and may increase interest rates a second time this year to slow the fastest inflation in two years and curb food costs that jumped 10.1 percent in October. The nation has made trading commodity futures more expensive to cool excessive speculation.

Increasing margins "is an effective way to deter those speculators that leverage too much," Tian Feng, analyst at BOC International (China) Ltd, said on Friday. A margin is the percentage of a contract value traders must deposit with brokers.

Soybeans, soybean oil and palm oil contracts in Dalian have dropped as much as 12 percent from the highest levels in more than two years on Nov 10 after the government announced moves to cool speculation. The Dalian bourse said on Thursday that if risks increase, it may take further measures.

The National Development and Reform Commission said on Thursday that commodity prices had declined in response to the government's moves to "clamp down strictly on market manipulation and other illegal activity, and curb excessive speculation."

Speculative funds have left the market and international prices have dropped, the commission said on its website.

September delivery soybeans in Dalian dropped 1.1 percent to 4,318 yuan ($649) a ton, soybean oil declined 1.2 percent to 9,350 yuan, and palm oil fell 0.7 percent to 8,626 yuan.

Natural rubber futures in Shanghai fell by the exchange-set limit of 5 percent on Friday to 30,375 yuan a ton. Cotton in Zhengzhou also fell by 5 percent to 24,320 yuan a ton.

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The Shanghai Futures Exchange, where the world's top three metals contracts trade, has said it will increase margins for copper, aluminum, steel wire, gold and fuel oil to 10 percent.

The Zhengzhou Commodity Exchange raised margin requirements for cotton, rice, and sugar contracts to 12 percent at the settlement on Friday, the bourse said in a statement on Wednesday. Trading limits were widened to 7 percent, it added.

White, or refined, sugar listed in Zhengzhou was the world's most-traded agricultural futures contract from January through June by volume, according to data from the Futures Industry Association.

Sugar was followed by Shanghai rubber and the Dalian soybean-meal and soybean-oil contracts.

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