Shanghai Futures Market sees bright futures
By Wang Lan (China Daily)
Updated: 2008-01-14 11:38
Developing Shanghai's futures market is essential for turning the city into an international financial center, experts say.
The past year has seen the expansion of the Shanghai Futures Exchange (SHFE), the biggest of China's three commodity exchanges, while the China Financial Futures Exchange (CFFEX) is in final preparations to launch index futures trading.
With the debut of gold contracts last Wednesday, the SHFE is trading a total of 6 commodity futures products, including contracts of copper, aluminum, zinc, gold, natural rubber and fuel oil.
To diversify its product range, the bourse plans to launch new contracts on nickel, silver and steel futures this year.
Analysts predict the Shanghai futures market will pick up speed in years to come on the back of the booming capital market and national economic growth.
Compared with the other two exchanges, the Shanghai bourse is playing a particularly crucial role in the development of the nation's futures market.
Statistics show that in 2007, the total turnover of all futures contracts on the SHFE amounted to 21.76 trillion yuan ($2.99 trillion), up 72 percent from the year before. It accounted for no less than 70 percent of the combined volume of futures transactions on all the nation's commodity exchanges.
Industrial experts and analysts say that as the futures market has expanded and efficiency has been improved in recent years, Shanghai has emerged as an international center for setting commodity market prices.
"Shanghai's commodity futures market is stepping up efforts to expand the range of products and deepen the pool of liquidity to suit the increasing needs of the nation's rapidly growing economy," says Gong Yangshu, a professor at Shanghai University of Finance and Economy.
All futures contracts have been traded actively on the SHFE in the past year. Zinc is a case in point. Since it started trading in April, zinc contracts have attracted a large number of traders, with total turnover amounting to 2.29 trillion yuan in the following eight months. Investors also showed increasing enthusiasm for copper futures in 2007. The turnover of copper contracts on the SHFE totaled 9.35 trillion yuan in 2007, up 189 percent from the year before.
Industrial analysts and experts say China's position as the world's major commodity producer and consumer has helped Shanghai become a pricing center. During the past several years of development, the SHFE has become an important pricing center for nonferrous metals. According to SHFE statistics, the coefficient index, an indicator reflecting the correlation between London Metals Exchange copper prices and those in Shanghai, has increased from less than 10 percent to 40 percent.
Market insiders predicted nonferrous metals will maintain an upward spiral in the longer term, with prices fluctuating within a wide margin in the year to come.
"Copper futures prices are expected to touch $10,800 per ton in the international market in 2008, with China's fast increasing demand being the major driver," says Li Jingyuan, an analyst at Haitong Futures.
Despite an expected positive price trend in the longer term, industrial analysts also show concern about the potential uncertainties hanging over global economic growth resulting from the expected drop in US demand.
Cooperation with foreign exchanges also helps the SHFE exert increased influence on the international futures market.
Last November, the SHFE inked a deal with the Central Japan Commodity Exchange to cooperate in a wide range of fields, including information sharing, staff training, product research and development and market promotion.
Experts say such cooperation not only benefits both exchanges but also helps Shanghai gather growing momentum in the financial sector.
According to SHFE president Yang Maijun, the exchange will seek more cooperation opportunities with other exchanges and will further expand its product range to better serve the nation's economic development.
Home to the China Financial Futures Exchange (CFFEX), where the upcoming CSI300 index futures is to trade, Shanghai is also playing a crucial role in the construction of the mainland's newborn financial futures market.
The CFFEX, which began in late October 2007, has approved a total of 65 member futures companies. Analysts say the CFFEX's membership system is widely seen as a major step forward to the launch of the mainland's first index futures. |
