China’s stock rout spread to the country’s commodities markets as investors rushed to raise cash.
Everything from silver to sugar to eggs tumbled with the Shanghai Composite Index, which crashed to a three-month low on Wednesday. Government measures to stabilize equities are failing to stop a stock market collapse.
“People are selling everything in sight to get their hands on cash,” Liu Xu, a trader at private asset-management company Guoyun Investment Co. in Beijing, said by phone. “Some need to cover their margin calls in the stock market, while others are gripped by fear that the Chinese economy will be affected by this crisis.”
Metals including nickel and silver on the Shanghai Futures Exchange fell to their daily limits, while rubber entered a bear market. The volume of copper traded was almost six times the three-month average. Steel rebar and iron ore, as well as eggs, sugar and soybean meal dropped to the lowest level allowed by their exchanges.
“Agricultural products in my view are collateral damage in this selloff,” said Liang Ruian, a fund manager at Shanghai-based Jianfeng Asset Management Co. “Pigs are still going to eat, so what does this stock market stampede have to do with soybean meal?”
Commodities globally have cooled this year, in part on slowing economic growth in China, the world’s largest consumer of energy, metals and grains. The Bloomberg Commodities Index, which tracks 22 raw materials, is down more than 6 percent so far in 2015. It was little changed on Wednesday, after falling to a three-month low the previous day.
Even as sentiment had soured on speculation demand is weakening, Wednesday’s selloff was triggered by the stock retreat, according to Ivan Szpakowski, a commodities strategist at Citigroup Inc. in Hong Kong.
“It’s less commodity specific, and it’s not even reflective of a deterioration in economic growth or commodity demand,” Szpakowski said. “That’s not what we’re seeing. We’re seeing a deterioration in sentiment and a spillover from the equities market.”
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Around 2:30 p.m. in Beijing, when the prices of almost all raw materials dropped to their daily limit, the trading floor at Beijing Ruigu Investment Co. went so quiet not even the sound of typing on a keyboard broke the silence, according to Wang Zhe, a trader at the commodity fund.
“Everyone staring at their screens was dumbfounded,” he said.
— With assistance by Feiwen Rong, and Alfred Cang