“Extreme” China commodities mania bursting

Great article here from Bloomie has it exactly right:

What started as a logical bet — that China’s economic stimulus and industrial reforms would lead to shortages of construction materials — quickly morphed into a full-blown commodities frenzy with little bearing on reality. As the nation’s army of individual investors piled in, they traded enough cotton in a single day last month to make one pair of jeans for everyone on Earth and shuffled around enough soybeans for 56 billion servings of tofu.

Now, as Chinese authorities introduce trading curbs to prevent surging commodities from fueling inflation and undermining plans to shut down inefficient producers, speculators are retreating as fast as they poured in. It’s the latest in a series of boom-bust market cycles that critics say are becoming more extreme as China’s policy makers flood the financial system with cash to stave off an economic hard landing.

…Nobody knows for sure how much of the trading surge has been driven by individuals, but the evidence suggests retail punters are playing a big role. More than 40 percent of the volume in rebar futures last month came during the night session, when it’s more convenient for people with day jobs to trade. The average holding period for contracts including rebar and iron ore was less than 3 hours in April, according to data compiled by Bloomberg.

Individuals with a bank account and official identity card can open a futures trading account at a brokerage within 40 minutes, with no initial balance required, Morgan Stanley said in a report on May 4.

And to think we hanged the national Budget on this (pun intended). ScoMo should be sacked.