Chinese Exchanges Hike Margins On Virtually All Commodities In (Temporary) Attempt To Cool Surging Prices
26 November 2010, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/article/chinese-exchanges-hike-margins-virtually-all-commodities-temporary-attempt-cool-surging-pricExcerpt:Just because the CME's hikes in all sorts of commodity margins were perfectly innocent and only had to do with "risk management" functions, we read with little surprise that China's Dalian Commodity and Shanghai Futures Exchanges are now also in the indirect price suppression, pardon, risk management business.
Earlier reports confirm that both exchanges will hike margins on virtually every single commodity traded in China.
This is likely the last stop gap measure before the central bank is forced to implement a rate hike and cool already near record inflation.
As the CME's failed attempts to kill silver and gold price appreciation using margin pressure have so far done very little,
we expect that the short-term impact of this move will wear off within a weak, at which point prices will resume their upward climb with a vengeance.
From Dow Jones:BEIJING (Dow Jones)--The Dalian Commodities Exchange will raise the required margins for soybean,
soymeal, soyoil, palm oil, corn, linear low-density polyethylene and polyvinyl chloride contracts to 10%, effective Monday, the bourse said in a statement on its website Friday.
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And just to make sure the message is heard loud and clear,
the Shanghai Futures Exchange did an identical move just hours earlier.
From Bloomberg:
Margins on copper, aluminum, steel wire, gold and fuel oil will rise to 10%, the bourse said in a statement. They gain to 12% for steel-reinforcing bars and zinc, and to 13% for rubber, after the market closes on Nov. 29, it said. Daily price limits for all products will widen to 6% from Nov. 30, it said.
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Bottom line: these moves will achieve a price drop in the near term as marginal speculators are kicked out.
We anticipate that the effect will last about a week, at which point price increases will resume with an even more pronounced pace and the PBoC will have no choice but to hike rates.
For now, however, crisis has been averted, and yet another can kicking stop-gap has been implemented that
does nothing to fix the underlying problem and everything to soothe the symptom in hopes that someone somewhere will actually do the right thing.
