Dalian Exchange to Lift Margins, Daily Trading Limits

Nov. 26 （Bloomberg） -- The Dalian Commodity Exchange in China, the world’s biggest consumer of raw materials, will raise margins and daily trading limits to curb speculation and cool inflation. Soybeans and palm oil traded on the bourse fell.

The margin requirement for soybeans, soybean meal, soybean oil, palm oil, corn, polyethylene and polyvinyl chloride contracts will be raised to 10 percent from Nov. 29, the exchange said in a statement on its website today. The bourse also raised the daily move limit to 6 percent, it added.

China, where the world’s top four farm futures contracts are traded, has pledged to control prices and may raise interest rates a second time this year to slow the fastest inflation in two years and curb food costs that jumped 10.1 percent in October. Dalian’s move follows similar measures by exchanges in Shanghai and Zhengzhou to increase the trading costs and after the cabinet said it will sell from grain, cooking-oil and sugar reserves.

“Raising margin requirements is an effective way to deter those speculators that leverage too much,” Tian Feng, analyst at BOC International （China） Ltd., said today. A margin is the proportion of cash that traders must deposit with brokerages.

Soybeans, soybean oil and palm oil contracts in Dalian have all dropped about 10 percent after reaching 28-month highs on Nov. 10 after the government announced it would act to curb price gains. The Dalian bourse said today if risks increase, it may take further measures to ensure a stable market.

The National Development and Reform Commission, the top economic planning agency, said yesterday commodity prices had declined in response to the government’s moves to “clamp down strictly on market manipulation and other illegal activity, and curb excessive speculation.”

Speculators Exit

Speculative funds have left the market and international prices have dropped, the commission said on website.

September-delivery soybeans in Dalian dropped 0.6 percent to 4,342 yuan （$653） a metric ton at the end of the morning session, soybean oil declined 0.7 percent to 9,396 yuan and palm oil fell as much as 2.2 percent before ending little changed at 8,676 yuan.

Natural rubber futures in Shanghai fell by the exchange-set limit of 5 percent today to 30,375 yuan a metric ton. Cotton in Zhengzhou also fell by 5 percent to 24,320 yuan a ton.

The Shanghai Futures Exchange, where the world’s top three metals contracts are traded, also said yesterday it will increase margins and daily price limits for copper, aluminum, steel wire, gold and fuel oil to 10 percent. They gain to 12 percent for steel-reinforcing bars and zinc, and to 13 percent for rubber, after the market closes on Nov. 29, it said.

Exchanges Act

The Zhengzhou Commodity Exchange raised margin requirements for cotton, rice, sugar contracts to 12 percent at the settlement today, the bourse said in a Nov. 24 statement. Trading limits were widened to 7 percent, it added.

White, or refined, sugar listed in Zhengzhou was the world’s most-traded agricultural futures contract from January through June by volume, according to data from the Futures Industry Association. It was followed by Shanghai rubber and the Dalian soybean-meal and soybean-oil contracts.

--Feiwen Rong. Editors: Richard Dobson, Ravil Shirodkar.