The recent fevered commodities trading in China hasn’t been limited to iron ore. Investors have piled into futures for everything from wheat and cotton to eggs and asphalt.
As with industrial metals, analysts reckon much of the interest is coming from speculative investors who have been turned off to China’s stock markets by tighter rules over trading.
“Chinese speculators didn’t want to buy into the equity market with all the curbs, so they jumped into the commodity markets and it seems they’ve done so in massive style,” said Michael Coleman, managing director at RCMA Asset Management Pte.
Rampant speculation means Chinese futures markets often don’t reflect economic or industry fundamentals, while excess liquidity attributable to loose monetary policy is further driving the spike in interest in agricultural futures.