SHANGHAI, Oct. 15 (SMM) – China's central bank continued reverse purchases ahead of China's National Day holiday, but tight market liquidity heightened market anticipation of a cut in the reserve ratio. As Central Huijin Investment raised stock holdings in four major Chinese banks to help prop up markets, the Shanghai Composite Index rose sharply to 2,100, but SHFE copper prices followed LME copper downward trend to hit RMB 58,500/mt post-holiday, a loss of over 1.3%. However, buying support and technical resistance at this level caused positions and trading volumes to increase.
In spot copper markets last week, post-holiday copper supply was stable and copper discounts were around RMB 100/mt. The price gap between SHFE 1210 and 1211 copper contracts narrowed gradually, heightening market expectation copper premiums may increase early in the coming week. Traders favored high-quality copper, and as domestic copper prices proved more resilient mid-week, the SHFE/LME copper price ratio rose to around 7.23, reducing losses on imported copper. Downstream producers still only purchased as needed early in the week, but purchase activity increased at prices below RMB 59,000/mt mid-week. Market transactions increased after initially falling, with market transactions driven by speculators buying spot copper and selling SHFE copper contracts.
In the coming week, SHFE copper prices are expected to challenge highs between RMB 59,500-59,800/mt.