China Securities Journal: Insiders: Mobility of Domestic Futures Market Is Still to Be Improved

Updated on: June 3, 2016

Reported by Ye Siqi, Journalist from China Securities Journal

The trend of Shanghai lead was rather forceful on June 2. The main force of Shanghai lead pb1607 contact was 12,860 yuan per ton up to closing, increasing by 190 yuan per ton or 1.5% compared to the last trading day. However, the trading volume of lead futures was still low, the trading volume of pb1607 contract was only 8374 lots yesterday.

Chai Zhenglong, Deputy General Manager of Yunnan Chi Hong Zn&Ge Co., Ltd, said on a press interview of the 13^th Shanghai Derivatives Market Forum that, futures market should possessed some certain mobility to promote the continuity and authenticity of futures price, then the enterprise can effectively utilize futures price for pricing in the trading contract, meanwhile, whether the enterprise can fully satisfy the hedging business demand and realize its hedging goal, depends on whether the futures market can provide the proper mobility, thus the role of futures market to serve entity economy can be effective.

The refined lead output of China in 2015 was 3.858 million tons, while the average daily inventory and trading volume of lead futures were 16,100 and 5,400 lots separately calculating by one side, which was only 2.1% and 0.7% of lead output and could not satisfy the pricing and avoiding risk demand of lead industry chain enterprises.

The Yuguang Group is the biggest domestic lead smelting enterprise, Miao Hongqiang, Deputy General Manager of the Group showed that, the output of lead pig in 2015 was 400,000 tons, but it was rather hard for enterprises to realize the target price of 2,000 tons for hedging trade in the trading day, because the market liquidity of lead futures was rather small.

Some insiders pointed out that, the problem of domestic futures was not the excess liquidity but the insufficient liquidity of many varieties, and the depth of market was not deep enough to satisfy the demand of enterprise’s risk management, so the overall mobility of the futures market is still to be improved.