China LLDPE futures slide 5% on interest rate hike concerns

23 November 2010 10:22  [Source: ICIS news]

SINGAPORE (ICIS)--Linear low density polyethylene (LLDPE) futures on the Dalian Commodity Exchange (DCE) slid 5% on Tuesday as growing concerns about a possible deposit interest rate hike dampened investor sentiment, local futures brokers said.

"The Chinese central bank's recent move to curb inflation through raising the bank reserve ratio has generated widespread expectation that it’ll raise interest rate by the end of December,” said Wang Chen, research director at Chinese brokerage Wanda Futures.

Liquidity focused on May, with 643,172 contracts traded, closing at yuan (CNY) 11,610/tonne ($1,746/tonne), CNY610/tonne or 5% lower from the settlement price on 22 November, DCE data showed.

LLDPE futures had been dampened by fear of an imminent interest rate hike as early as September this year, but the steeper decline this time reflected a more pervasive concern, said Chen.

But futures prices could move up in the next few days because of strong fundamentals in the physical LLDPE market, said Chen.

LLDPE demand is currently supported by the agricultural and packaging film application sectors, and high consumption in these two sectors would last until the first half of January, according to LLDPE distributors in the physical market.

Sharp falls in the LLDPE futures trade had dampened sentiment in the physical LLDPE market, with most buyers waiting on the sidelines, the distributors said.

Imported and locally produced LLDPE were mainly selling at around CNY10,800-10,900/tonne ex-warehouse in eastern China, CNY100-200/tonne lower from last Friday, they added.

($1 = CNY6.65)

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By: Chow Bee Lin
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