Shanghai Metal Prices Move Higher on Hopes for New Year

SHANGHAI, Dec. 30 (SMM) – On Friday, transactions were relatively active in SHFE metal markets. On the last trading day of the year, SHFE metals prices moved up after opening higher as investors with high risk appetite entered into markets, .

China's central bank suspended sales of 3-month bills on December 29th, the first of its kind in 6 months, which is widely regarded as a signal of possible cut of bank's requirement reserve ratio. A total of RMB 13 billion of central bank bills and repurchase contracts matured this week. On Tuesday, the central bank issued RMB 4 billion of 1-year bills and suspended bond repurchase. In this context, the central bank released RMB 9 billion of liquidity into market this week, ending four consecutive weeks of net capital return. It is expected that monetary policy from China's central bank may shift from tight to be slightly moderate amid easing inflationary pressure, and China's regulation focus may be shifted from anti-inflation to steady economic growth. This means that China's central bank may slightly loosen liquidity at banks to support development of real economy. In this context, possibility for RRR cut is quiet high around the New Year holiday.

LME base metals prices fluctuated at high levels overnight. Metal prices firstly fell after the euro plummeted to a 15-month low versus US dollar, but later climbed supported by successful Italian bond sales and positive US economic data. Finally, LME base metals prices reversed earlier losses, with copper and nickel prices leading the gains.
 
At the year end, trading sentiment in the Shanghai market is turning lighter. With the lack of major news, metals market will not stage volatile movements, with Shanghai metal prices to fluctuate for the foreseeable future.