Reuters reported that Chinese steel and iron ore futures rose to their highest in more than a week on hopes that a brightening economic outlook would spur demand for the two commodities, although property sector risks kept advances in check.
Stocks in Hong Kong edged up to more than 3-1/2 year highs and those in the mainland held to Monday’s sharp gains. The rally was fuelled by optimism that the world’s second largest economy has turned a corner and that more growth friendly policies are ahead.
The most traded iron ore contract for January 2015 delivery on the Dalian Commodity Exchange hit a session high of CNY 690 per tonne, its loftiest since July 18. It closed up 1% at CNY 684.
Rebar for January 2015 rose 1.3% to end at CNY 3,105 per tonne on the Shanghai Futures Exchange, after peaking at CNY 3,115 also its highest since July 18th 2014.
Ms Helen Lau senior mining analyst at UOB Kay Hian Securities in Hong Kong said that “The sentiment towards the second half for China has really improved but we still believe that the stimulus we have seen is minuscule and the property market remains tough.”
Optimism over China’s economy rose after HSBC’s preliminary survey showed manufacturing activity there quickened to an 18 month high in July, suggesting that government measures to stimulate the economy had been effective.
Some analysts said that more stimulus may be needed to counter a cooling property market and increasing risks in the financial system, such as deteriorating credit quality.
Ms Lau said that China will release its official purchasing managers’ index for the manufacturing sector on Friday. Gains in steel prices came as Chinese traders’ inventories of steel products fell further to 13 million tonnes. That is the lowest stockpiles of steel held by traders since the last week of 2012, when they stood at 11.88 million tonnes.
Source – Reuters