Seventeen of the 19 commodity futures contracts traded on the mainland's three exchanges fell sharply yesterday in tandem with the worldwide market slump in the wake of growing concern about a US-led economic downturn.
The copper and zinc futures for delivery in 12 different months on Shanghai Futures Exchange (SHFE) dropped to the daily allowable limits shortly after the opening.
The most actively traded copper contracts for delivery in April plummeted to 58,560 yuan per ton, down 4.02 percent before touching the bottom.
Gold futures contracts on SHFE also continued the downward spiral for the third consecutive day, with the most actively traded contract for June delivery sliding 4.08 percent to 206.42 yuan per gram.
Analysts attributed the worldwide fall in commodity prices to investor worries about a possible glut in supply as demand tapers off in a recession-hit US. Their concern has been heightened by the latest batch of US economic figures pointing to an even worse outlook for 2008.
The data released by the US government in the past weeks showed rising unemployment, falling growth rate in the manufacturing sector and declining monthly retail sales, all of which point to a slowdown of the US economy that has been reeling from the subprime mortgage crisis since August.
"The price drop in the domestic market was triggered much more by dwindling investor confidence than market fundamentals," said Zhao Xijun, a professor of finance at Renmin University in Beijing.
Zhou Zhiqiang, an analyst at Great Wall Futures Co in Shanghai, said the deteriorating outlook for the US economy would raise traders' concern about a declining US demand for commodities in 2008 and hence trigger a selling spree in the international markets.
On Dalian Commodity Exchange (DCE) and Zhengzhou Commodity Exchange (ZCE), the nation's two futures exchanges specializing in agricultural produce, most contracts saw sharp price drops.
The most actively traded soybean contract for September delivery on DCE sank 3.29 percent to close at 4,550 yuan per ton, the biggest one-day drop over the past six months. The sugar contract for July delivery on ZCE also fell 1.96 percent to close at 3,707 yuan per ton.
Li Jingyuan, an analyst at Haitong Futures Co in Shanghai, said: "The all-round price drop of so wide a range of commodities in the domestic market is rare, which reflects a deepening investor concern about the global economy. As China's economy won't be an exception to the global trend, Chinese investors can't afford to shrug off growing fears of a global recession."
(China Daily January 23, 2008)
