SHANGHAI, Sept. 13 (SMM) -- SHFE base metal market opened with sharp decline on Monday, affected by continuous tight money supply from China’s Central Bank and sharp decline in overseas equity and commodity markets. SHFE copper and zinc recorded the largest decline, with the most active contracts of SHFE copper and zinc down by more than 1.5%
According to data from China’s Central Bank, China’s money supply in August continued to drop. The M2 (board measure money supply) was RMB 78.07 trillion, up 13.5%, but with the growth rate further down 1.2 percent compared to an increase of 14.7% in July. Increases in M1 (narrow measure money supply) also dropped. In August, the RMB and foreign currency loans were RMB 52.44 trillion, up 16.4% YoY, but 0.2 percent lower MoM and 2.2 percent lower YoY. China’s monetary policy has been tightening, adding capital pressure on market, and capital supply will unlikely improve in the near-term.
Negative factors came in succession. European stock markets plummeted over fears of a Greek default, dragging down commodity and base metal prices. Chinese NDRC officials said inflation in China will remain higher in the coming months, and China’s PBOC reiterated stabilizing consumer prices remained its top priority of macro-economic regulation. Besides, related supervision institutions have warned risks in the commercial property sector and property markets in the second and third tier cities, which are all negatively affecting base metal markets. Although Chinese stock markets had signs of stabilizing last week, both Chinese and international stock markets will inevitably decline in the mid term, and will fall further in the later period, which will affect base metal markets. As long as expectations of high inflation remain in China, markets will continue to face downward pressures.