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 Copper Price Points To Beijing Activity (zt) |
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ceo/cfo
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头衔: 海归中将
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加入时间: 2004/11/05
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作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
I am afraid Mr. Liu got squeezed by bunch of international hedging funds and copper traders if they were acting in concert. So now the Chinese companies are trying to talk down the copper price. Legally the Chinese company in question does not have to honor these short positions done by a non licensed and unauthorized single trader. We will see what happens next.
Single Trader Under Probe
Is a Product of a System
That Influences Markets
By JAMES T. AREDDY
Staff Reporter of THE WALL STREET JOURNAL
November 21, 2005； Page A14
SHANGHAI – When the global price of copper hit records last week, markets said it was the result of actions by a single participant. Yet the trader in question is a product of a Chinese government-run domestic commodity-trading system that has been increasingly influencing markets from London to Chicago.
A trader for China's State Reserve Bureau, Liu Qibing, is being fingered for executing copper-futures trades that could leave the government on the hook for big losses on the London Metal Exchange. Traders in China say Mr. Liu was also part of a team that had for the past two years been running a broader market strategy that involved selling copper in London while buying it in Shanghai.
Active participation in a global commodity market by a government body is unusual and reflects how much attention Beijing is paying to raw materials like copper, which China is using for many things including expansion of its power grid. While arbitrage is a common market strategy, the SRB's apparent focus on playing one market off the other puts a new light on Mr. Liu's role in problems it now faces in the London market.
As the SRB is an arm of China's communist-era state planning agency, its presence also raises questions of whether its underlying motive in markets is to keep commodity prices low. The bureau is in charge of maintaining the overall balance of China's major commodity imports and exports, as well as stockpiles of grain, cotton and other vital goods.
The copper-trading strategy the SRB has used since around 2003, called negative arbitrage, takes advantage of price differences between London and Shanghai, the world's second-biggest copper futures market. The strategy has become hugely popular among futures traders in China.
Traders say profiting on the trade －－ which is counterintuitive as Shanghai quotes prices that are typically higher than London prices －－ depends on how far apart prices are on the two markets, and the fact that the Shanghai market is closed to foreigners.
"Last year and in 2003, people who did arbitrage made lots of money," says Liu Zhechang, general manager of Wan Jie Ding Xin, a small Shanghai metal-trading firm.
But this year, a growing trade by hedge funds befuddled the play. Their aggressive buying of copper in London helped narrow the traditional price gap －－ all but eliminating the chance to profit on negative arbitrage. "It's very easy for the hedge funds to push the Chinese companies around," says Kevin Bi, vice general manager of Golden Dragon International Trading Co., the trading arm of a big China copper-pipe maker.
Even before the botched trades by Mr. Liu, the bureau was increasingly coming under fire in China. It came in for an unusual rebuke from China's national audit bureau in September, around the time rumors of big losses on the London exchange started. It is unclear how big a role Mr. Liu played in designing the aggressive strategy of the China trades, or specifically how heavily the bureau traded the negative arbitrage play. London dealers estimate Mr. Liu's short position in copper at 100,000 to 200,000 tons. The official China Daily said last week that China has conducted an investigation and established that Mr. Liu was trading on his own behalf and not as any part of official policy.
The bureau's actual skill in trading is unclear －－ even at home where it is dominant. Mr. Liu's losing positions have appeared in London. But analysts say that in recent weeks the SRB has moved unusually large amounts of copper around China in ways suggesting the bureau is now on the wrong side of trends on the Shanghai market as well.
Mr. Liu's whereabouts remain a mystery. A woman in his 10th floor Beijing apartment refused to answer the door Friday. Mr. Liu was regularly in Shanghai and kept an office nearby at a branch of Cofco Futures Co., a state-owned company that often trades for SRB, and traders say he was a regular visitor who liked to talk market strategy.
Meanwhile, the SRB has sent a number of signals that analysts say are attempts to pull prices lower. Traders calculate it has quietly moved about 40,000 tons of copper to the Shanghai Futures Exchange warehouse in the past three weeks, swelling physical copper stocks in the warehouse to nearly five times the normal levels. It also held a rare auction of 20,000 tons last week.
Moving so much copper so publicly, they say, is meant to show that the bureau has the wherewithal to deliver by mid-December the copper that traders estimate Mr. Liu contracted it to sell in London.
Copper prices continued to push higher. Copper finished Friday in London at a record $4,200 a metric ton, up from $4,145 Thursday but off the day's high of $4,243.
Activity by state-owned trading firm Cofco is considered a proxy for the SRB. As the Liu case emerged during recent weeks, exchange data show Cofco did an about-face in strategy and became a significant market bear. On the final day of the past 16 months, Cofco's position was "long," or bullish, copper by an average 26,797 metric tons on the Shanghai Futures Exchange. That suggests it was supporting at least one side of the negative arbitrage strategy of buying Shanghai and selling London. By Friday, Cofco had reversed and held a net short position equal to 45,120 metric tons －－ an expensive bet the price will fall.
作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 Copper Price Points To Beijing Activity (zt) -- ceo/cfo - (5916 Byte) 2005-11-22 周二, 05:53 (1138 reads)
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