SASAC: SOEs may cancel "bad" derivatives contracts

A report that Chinese SOEs may be allowed to default on commodity derivative contracts with investment banks chilled commodities markets from China to the US, Reuters reported. While last year China helped rally prices to record highs, Caijing Magazine reported that the State Asset Supervision and Administration Commission (SASAC) recently told six foreign banks that state-owned enterprises reserve the right to walk away from "bad" contracts. The announcement had a particularly strong negative impact on global soy and gold futures. Unnamed analysts said the new policy is likely an indication that significant numbers of SOEs are facing losses on commodity derivatives. A SASAC representative declined to comment until the relevant departments’ official comment has been made. In related news, stock markets in the US and Europe posted strong negative reactions to a 7% decline in the Shanghai Composite Index, a three-month low, following concerns that Beijing is beginning to slow growth and curb bank lending.