Copper in Shanghai Advances as Central Bank Eases Lending Fears

SHANGHAI, July 30 -- Copper in Shanghai gained, after falling the most in two and a half months yesterday, as China's central bank damped speculation it would curb bank lending, boosting the demand outlook for raw materials.

    Futures tumbled yesterday after speculation that the Chinese government will limit bank loans sent the country's stock market to plunge the most in eight months, dragging emerging markets and base metals lower. Stocks climbed this morning after the central bank said it will maintain a "moderately loose monetary policy" and aims to consolidate the nation's economic recovery.

    "The tightening of bank lending has been the major fear in the minds of copper importers and dealers," Lin Xu, analyst at China International Futures Co. in Shenzhen, said by phone today. "So the reiteration of a loose monetary policy from the central bank helped sentiment."

    November-delivery copper on the Shanghai Futures Exchange gained as much as 0.9 percent to 43,240 yuan ($6,328) a metric ton and traded at 43,110 yuan at 10:32 a.m. local time. It fell 4.4 percent yesterday, the biggest drop since May 14.

    Three-month delivery copper on the London Metal Exchange rose 0.6 percent to $5,445 a ton. Copper for September delivery in New York gained 0.2 percent at $2.4750 a pound.

    "To continue to foster the relatively smooth and fast economic development is the top priority," the People's Bank of China said in a statement last yesterday, citing recent remarks by Deputy Governor Su Ning.

    The Shanghai Composite advanced 0.4 percent to 3,280.14 at 9:46 a.m., erasing earlier losses. The measure tumbled 5 percent yesterday amid concern the government will curb inflows into a market that had more than doubled from last year's low.

    "The visible recovery in China's equity market this morning also gave a bit of support," Lin said.

    Among other LME-traded metals, aluminum added 0.3 percent to $1,800 a ton, and zinc was up 1 percent at $1,660 a ton. Nickel was little changed at $16,290 a ton. Lead and tin hadn't traded by 9:59 a.m. in Singapore.

    (Source: Bloomberg)