China’s plastics futures down sharply on bearish sentiment

17 August 2009 12:20  [Source: ICIS news]

SINGAPORE (ICIS news)--China’s linear low density polyethylene (LLDPE) and polyvinyl chloride (PVC) futures dropped by up to 5.2% on Monday due to bearish sentiment triggered by sharp falls on the Chinese stock exchanges and weaker international crude values, local futures brokers and plastics traders said on Monday.

China’s Shanghai Composite Index tumbled 5.8%, or 176.34, to 2,870.63 on Monday, the biggest daily drop this year. China’s smaller stock exchange, the Shenzhen Composite Index, plunged 830.95, or 6.7%, to 11,668.8, mainly due to falling foreign direct investment (FDI) in July for the 10th consecutive month, a decline in exports and the government’s tightening of credit, said analysts.

September LLDPE futures trading on the Dalian Commodity Exchange (DCE) was halted in the afternoon session after falling by 5.2% to yuan (CNY) 10,935/tonne ($1,599/tonne), according to DCE data.

According to the DCE’s trading rules, a transaction price established after a 5% fall from the preceding day’s settlement price becomes the floor price, and subsequent offers below this level are not accepted on the same trading day.

The sharp falls in futures dampened sentiment in the domestic LLDPE physical market, with price discussions hovering around CNY10,400-11,450/tonne ex-warehouse, according to chemical market intelligence service ICIS-CBI.

September PVC futures trading on the DCE was halted in the morning session after falling by 5% to CNY7,140/tonne, registering its lowest level since the end of July and its biggest one-day loss since its launch in late May, according to DCE data.

A similar sell off in PVC futures occurred in early August, when futures values dropped around 2%, also on concerns that the Chinese government might be looking to tighten credit, a Chinese PVC trader said. However, the market quickly recovered after banking regulators made it clear that a credit clampdown was not on the cards, the trader added.

($1 = CNY6.84)

Additional reporting by Ng Hun Wei and Judith Wang
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