HONG KONG, May 9 (Reuters) - Hong Kong broker BANDS Financial is eyeing opportunities in iron ore and crude oil markets even as the outlook for base metals appears subdued for the rest of 2017, its senior executives said.
China’s central bank has cautiously shifted to a tightening policy bias in recent months, while Beijing has announced a string of measures to curb financial system risk which has soured sentiment towards metals this year, Managing Director John Browning said.
“For the next two quarters, growth is not a requirement. Financial stability is a requirement as we go towards the party conference,” Browning told Reuters in an interview on the sidelines of the LMEWeek conference, referring to the 19th Party Congress expected in the autumn.
Zinc and copper, which closed out 2016 with the best performance in half a decade and extended their run into mid February have both erased the year’s gains.
Still, the futures brokerage, which specialises in cross-border arbitrage, sees opportunities outside the metals space if China opens its crude oil and iron ore contracts to international investors as anticipated later this year.
Foreign investors are currently not able to directly invest in China’s commodity futures contracts.
“There has been a lot of growth of business in China out of Dalian and elsewhere .. and the West hasn’t caught up with it,” said Jeremy Goldwyn, who heads the broker’s Asian business development.
“(Western investors) are not going to directly connect to the Chinese exchanges. The likelihood is that there’s going to be a conduit. There’s a natural opportunity for companies like ourselves.”
BANDS Financial has been expanding its footprint into Singapore’s iron ore in preparation, given the huge liquidity in Dalian Commodity Exchange’s (DCE) iron ore contract.
“We see the same signs (of liquidity) in the global market for iron ore contracts at SGX, so we want to tap into this,” said Managing Director Tiger Shi.
The recent launch of commodities derivatives in China such as the Dalian exchange’s launch of soymeal options in March, could yield more arbitrage opportunities, Goldwyn said. (Reporting by Melanie Burton; Editing by Richard Pullin)