Tag Archives: Asia

Earth Elements

Commodities On Steepest Decline in Years

The prediction on low-performing commodities for the year already seem to be fulfilling themselves, as hedge funds rein in their bullish attitude by most in seven weeks. With China showing signs of slowed economic growth, commodity prices have reached an eight-month low on increased surpluses.

According to the U.S. Commodity Futures Trading Commission data, 18 commodities traded on U.S. markets have dropped by 11 percent last week. Wheat appears to be affected the most, while investors have also turned bearish on corn, coffee, sugar, and soybean oil. On the contrary, gold prices rose to their highest levels since mid-November.

Since 31st December, the prices of raw materials have fallen 3.5 percent, marking the worst start to a year since 2007. December was the 22nd straight month of declines for Chinese producer prices, the longest drop since the financial crisis that hit Asia in the 1990s. The U.S. department of agriculture anticipates that wheat and soybean stockpiles around the world will be larger than analysts estimated.

Despite lowered Chinese demand, however, some commodities, such as copper, will fare on better prices with support coming in on improved U.S. and European economies.

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Seoul, South Korea

South Korea to Extend Trading Hours

Asia’s fourth-biggest equity market has been under-performing with local trading volumes falling into a six-year long decline, pushing North Korea’s bourse operator to consider extending trading hours.

Korea’s six-hour trading day may be prolonged by the Korea Exchange within the next five years in an attempt to increase its liquidity in the $1.2 trillion market. The announcement comes as the first plan for development taken by Choi Kyung Soo since becoming the chairman of the Exchange in October. In an emailed statement earlier today, the bourse mentioned that it will consider the purchase of foreign alternative trading systems and exchanges in the next three years.

The significant outflows from South Korea’s individual investors extended into a fifth year, pushing the turnover of Kospi (KOSPI) index shares to its lowest level since 2007, and the exchange is not betting on increased demand from foreign money managers in order boost its trading volume. In the second half of 2013 the Kospi received $12.9 billion from foreigners buying South Korean shares, helping the index advance 7.9 percent. So fat this year, however, the index lost 2.6 percent.

In a press conference held in Seoul earlier today, Choi stated: “The new plan is in place to lure more foreign investors into the local market and boost the overall trading volume.”

About half of the equity trading on the benchmark Kospi index last year came from individual investors who sold a net $5.3 billion shares. According to Choi, the extension of hours may be implemented as early as within the first half of 2014, following discussions with industry officials.

A second plan of the Korea Exchange, furthermore, sees the introduction of futures contracts on the Kospi 200 Volatility Index, a gauge of anticipated price fluctuations in the country’s stock market.

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bullion

Chinese Consumerism Props Up Gold Prices

Despite fears of commodities losing value this year and investor hesitation in buying into gold, the precious metal climbed to its highest level in three weeks on increased consumption in Asia, despite the lack of investing demand.

Last year, gold dropped 28 percent of its values, the most since 1981, as investors fled to rising equities and dampened inflation for store value. The Fed’s highly publicised talks regarding economic stimulus and last month’s decision to cut funds for bond purchasing from $85 billion to $75 billion played a big role in the market sentiment towards gold.

Despite investors’ hesitation, however, Chinese consumers are certainly taking advantage of the lower prices as shipments of gold to China more that doubled in the first eleven months of the year, as data from the Hong Kong Census and Statistics Department. The title of the world’s biggest bullion consumer has probably shifted from India to China, the World Gold Council said.

SPDR Gold Trust, the biggest gold-backed exchange-traded product, saw its holding deplete to 794.62 tons yesterday, the lowest since January 2009, according to reports published on the fund’s website. A sum of 552.6 tons was taken out in the past year.

Other metals have been showing upward movement as well. Silver for immediate delivery rose 0.2 percent, its fourth consecutive day of advancement. Platinum also climbed 0.2 percent, while Palladium fell 0.1 percent.

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Nikkei

Japanese Indices Stagger Upon Record Stimulus

The Japanese Nikkei 225 Stock Average risks a precipitous drop of about 20 percent to 12,000 unless the government can convince investors of the success of its economic stimulus plans, according to the leader of Japan equities, Nomura Holdings Inc. (8604).

The Nikkei index increased 2.1 percent to 14,876.41 as the trading day closed in Tokyo today, having fallen 4.8 percent from the 5 1/2-year high it reached on 22nd May. Investors worry that the government’s plan to increase sales tax will cripple momentum as the economy is already kept afloat by an unprecedented stimulus.

Japan’s equities, however, still outperform other developed markets for the year, as the Nikkei 225 and the broader Topix indices rose 40 percent through yesterday. Japanese stocks have attracted $108.5 billion this year from overseas institutional investors.

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Gold charioteer

Gold Travels East on Lower-Price Path

Overall international demand for gold dropped 21 percent in the third quarters as both investors and central banks show reluctance in buying the metal, according to the World Gold Council.

The council announced in a report today that demand around the globe plunged to 868.5 metric tons, compared to 1,101.4 ton last year. Investors purchased 118.7 tons from ETFs and similar products, while central bank purchases fell 17 percent.

April of this year saw the gold market move into a bear, casing gold prices to drop 24 percent with inflations doubting the precious metal’s value as equity prices rallied against falling inflation levels.

If we isolate the Easter market, however, a different image emerges as gold demand jumped in China, India, and the Middle East in the 12 months to September against decreasing European sales. The World Gold Council mentioned that the difference in markets highlights the movement of the global bullion market form west to east.

Demand for jewellery, bars and coins jumped 30 percent in China to 996.3 metric tons, while in India gold experienced a 24 percent increase reaching 977.6 tons. On the contrary, demand in Europe slid 11 percent during the same period with marked drops in the U.K., France, and Switzerland. Moreover, the share of Global sales corresponding to Asia and the Middle East rallied to 68 percent from previously 65 percent over the 12 months, while the share from the European market fell to 8.3 percent from 11 percent.

With gold set for an annual decline. the first since 2000, bullion travels eastward attracting Asian investors with its lower prices as the Federal Reserve considers curtailing its financial stimulus amidst signs of an economic recovery for the U.S.

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