30 Jun-01 Jul, 2015 - Singapore, SINGAPORE
Novotel Singapore Clarke Quay
Novotel Singapore Clarke Quay
| |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
China allows over 100 state-owned firms to assume commodity derivatives trading, creating opportunities for structured trade finance deals.
China is one of the world's biggest consumers of metals, energy and agricultural products. The country has recently more than tripled the number of central government owned firms that are allowed to trade commodities derivatives overseas without regulator's approval.
The move is expected to give China an extra edge in global markets for metals, energy and agricultural products. The development of China's involvement in derivatives and international financial markets also has ramifications for trade financiers. Derivatives are an important risk management tool which allow traders to hedge and therefore reduce price risk, which should have a knock-on effect in terms of cost of financing and the allocation of regulatory risk capital within banks lending to Chinese companies.
The number of companies now allowed to trade derivatives is now said to be over 100 - making it the biggest expansion in nearly a decade. These companies are likely to be targeted by financiers as the ones engaging in new international operations. As such, they may represent opportunities in terms of structured trade finance. This is particularly the case for the energy sector and users of oil products such as airlines and shipping companies. The resulting capital inflows and outflows will certainly attract the attention of financiers.
We'll be discussing the prospects for trade financiers and traders in the context of these new opportunities in China at Asia STCF (Structured Trade & Commodity Finance) on 30 June-1 July, 2015, in Singapore.
Contact Ms. Grace Oh at grace@cmtsp.com.sg or call +65 6346 9147 for more details.
16 Jun, 2015
Recent market analyses indicate that some of the banks have shrunk their commodity trade finance portfolio in view of cranking up of capitalisation requirements by regulators, thus squeezing the margins on offer.
Meanwhile it is also witnessed that certain investors are resigning from asset class completely, especially those who have repeatedly lost money in commodities. Some of these investors are also eyeing different forms of exposure with lower volatility.
In view of such trends, hedge fund company Scipion Capital is offering an alternative - a commodity trade finance fund that delivers decent steady returns. The fund aims at attracting institutional investors who are dissatisfied with poor performance of commodity funds.
Scipion is taking its African Opportunities Fund to the broader institutional investor market. Scipion is eyeing sticky money, some of its existing investors are family offices and wealthy individuals. The credit fund offers short-term, secured loans that cover the transport of commodities from the African interior to the port, or vice versa. Most of the loans offered earn a return of about 8 to 18 percent per annum, but a lot depends on the collateral managers on field.
Risk factor is also another area that helps the fund earn money. For instance it covers areas that banks can't or won't lend against, such as funding gasoline or diesel shipments from an oil major's refinery in Europe to Ghana.
Some of the attractive commodities that are lucrative for investments include imports of cement or bitumen, or exports of cocoa, coffee and cotton - which are high consumption commodities.
More on commodity trade finance will be discussed at Asia STCF (Structured Trade & Commodity Finance) 2015 on 30 Jun-01 Jul, 2015 in Singapore.
Contact Ms. Grace Oh at grace@cmtsp.com.sg or call +65 6346 9147 for more details.
04 May, 2015
In 2015, China looks to build its commodity stock piles and the Ministry of Finance has announced that - It would spend 154.6 billion yuan ($24.7 billion) this year to build up its reserves of grains, edible oils and what it termed "other materials." Although "other materials" is not specified, crude oil is said to be among the commodities that China plans to hoard. It's said that country plans to hoard 90 days' worth of oil in reserves to cover for supply disruptions, in line with other major economies.
The spending on stockpile has risen by 33% compared to 2014, when stockpile-spending was only 22%.
China has also imported oil, iron ore, copper and other commodities in record-high quantities in 2014 as prices for key commodities fell to their lowest levels in more than five years.
While the country is going for massive stock-piling, it is controlling the consumption of coal with policy changes to clean up highly-polluting industries.
The higher imports underline China's appetite for resources which it regards as essential for long-term development, despite a recent downward trend in actual consumption levels.
China's domestic supply of industrial metals like copper is weak and these metals are likely to be stockpiled by the country too. Besides, China also buys agricultural commodities such as corn, wheat and soybeans from farmers when market prices fall below preset state-guaranteed levels.
With this year's spending, China will try to cover losses from auctioning its cotton stockpiles - which traders say could be approximately 10 million metric tons - bought mostly when cotton prices were higher than the current rates.
More on China's commodity trade will be discussed at ASIA STCF: Asia Structured Trade & Commodity Finance on 30 June - 1 July, 2015 in Singapore.
Contact Ms. Grace Oh at grace@cmtsp.com.sg or call +65 6346 9147 for more details.
23 Mar, 2015
