Retail investors, high net worth individuals and wealth managers coupled with Chinese investors have caused a surge in commodities trading over the past couple of months.
This development is sending shock waves through global commodity markets as investors pile into futures, says George Lucas, managing director Instreet Investment.
“Adding fuel to the fire was the decision by Chinese regulators to clampdown on equity markets. In response, Chinese investors have diverted their money into commodity futures – not property assets as many may have expected.
“All this has significant consequences for Australia as our currency, economy and stock market are influenced by the price of iron ore. And having the price of iron linked to Chinese retail investors is not ideal (to say the least).
“This madness has surprised western investors and rattled global commodity markets, causing a sharp run-up in the price of steel and iron ore futures.
“Indeed, at the peak day of last month’s commodities fever, the number of steel reinforcement bar contracts traded in Shanghai exceeded volumes produced by China annually.
“In an attempt to cool the market and reduce the high volumes, the Chinese regulator increased transactions fees and margin requirements on Chinese commodity futures. This led to the large fall in iron ore prices we experienced last week,” said Mr Lucas.
Instreet is an independent investment house that works closely with the financial adviser community to conceive and distribute retail investment products. After identifying adviser needs and market trends, Instreet builds customised investments sourcing quality wholesale providers. By doing so, Instreet makes institutional assets available to individual investors. The end result is a range of investment solutions designed to better achieve the goals of clients and advisers.
For more information: www.instreet.com.au
George Lucas at Instreet:
M: 0418 202 228
Simrita Virk at Shed Media:
M: 043 4531 172