Chinese commodity futures turmoil casts doubt on possible trading links
Price fluctuations reveal that the mainland market is still too much of a speculative gamble for Hong Kong and overseas investors, analysts say
With the launch of the Shenzhen-Hong Kong Stock Connect approaching, some observers now expect the next step in Hong Kong’s financial links to the mainland could come through commodities trading.
Earlier this month, Charles Li Xiaojia, the chief executive of Hong Kong Exchanges and Clearing, said the bourse was likely to explore similar schemes for metals, bonds and initial share sales.
However, despite the idea being highlighted in the Hong Kong stock exchange’s 2016-18 strategic plan, the recent turmoil in the mainland’s commodities futures market could now set back those plans.
As prices fluctuated, analysts said it underlined just how immature and speculative the market was in the mainland. The aim of a commodities connect, as with the Shenzhen and Shanghai share trading links, is to essentially attract more overseas investors. But the fluctuations would have spooked them, the analysts said.
The wild trading of November 11 began shortly after the night session opened, with the price of purified terephthalic acid, a petroleum-based chemical product, soaring 7 per cent, the maximum increase allowed. But within 10 seconds, traders said, the price then plunged nearly 14 per cent.
