SHFE Metals Fall as China’s Stocks Hit New Low

SHANGHAI, Oct. 20 (SMM) -- SHFE metal prices moved lower after a low open on Thursday. As China’s stocks continued to hit new lows in the afternoon session, SHFE copper prices fell by the daily price limit, and SHFE three-month zinc contract prices also declined by the daily price limit. Trading volumes shrank, with panic sentiment dominating the market.

Apart from the lasting European debt crisis, Chinese stock markets also added to pressures on Shanghai metals. Shanghai and Shenzhen stock markets have been continuously moving down during recent days of trading, which was in part due to new IPOs during recent days. After China cancelled the 3-month long pre-censoring period for new IPOs, new stocks are springing out recently, leading to stronger capital pressures in stock markets. The Shanghai Composite Index already dropped 2.57% today to 2,316.36 points. The Shenzhen Component Index also plunged 3.74% to 9,727.97 points. As of the end of the morning session, a total of RMB 5.851 billion flew out of the Shanghai stock market and RMB 5.028 billion flew out of the Shenzhen stock market. The total net capital outflow in the two stock markets is RMB 10.879 billion. Capital outflow is seen in all industries and no capital inflow is seen. Investors are quite pessimistic at the moment as cautiousness has prevailed.

Funds are exiting metal markets, and the gloomy economic environment also helps dampen demand for metals. International speculative funds have gradually exited copper market since the start of 3Q, and according to COMEX copper position reports, speculative funds held net short positions in late September instead of net long positions, with long positions exiting the market, which also allow metal prices to accelerate declines.