Margin lending fuels China futures boom

Chinese hedge funds are providing margin finance for leveraged bets on the country’s booming commodity futures market, in an echo of last year’s stock market boom and bust, the Financial Times reports. Futures prices for the so-called ferrous complex of steel, iron ore, coking coal and coke have risen sharply this year as Chinese fiscal and monetary stimulus has produced a revival of construction activity in real estate and infrastructure. Rising commodity prices have in turn fuelled speculation in the futures markets. Turnover for front month coking coal futures traded in Dalian hit RMB 1.2tn in October, the second-largest month on record behind April. Commodity trading has surged as investors use the sector as a quick and easy way to place leveraged bets on the domestic economy or government reforms.