Metal futures market ‘still fairly niche’

Millet Enriquez

emelita@mediacorp.com.sg

SINGAPORE

But some analysts said it will take some time before metal futures will see good volume when it is eventually launched here, indicating that the market is still fairly niche.

“From a retail point of view, I think it will still be fairly niche.

“We probably won’t see a huge surge (in volume) immediately,” said Mr Wong Sui Jau, general manager at Fundsupermart.com.

Together with the London Metal Exchange (LME), Singapore Exchange is jointly developing cash-settled mini monthly metals futures contracts that will be traded and cleared on the local bourse.

Retail investors here will have access to these metals futures contracts which are priced off global benchmark prices from LME.

The first contracts that are expected to be rolled out in the first quarter of next year are copper and zinc, followed by other metals contracts later in the year, subject to regulatory approvals.

Mr Wong believes the metal futures will likely appeal more to savvy investors who may want to make a pure play on specific metals.

For retail investors who opt for exposure in several metals for portfolio diversification, he said they may be better off buying a fund benchmarked on metals and natural resources.

“For directly trading it, generally you are using futures contracts so the risk is much higher given that generally for such derivatives, it’s highly leveraged.

“So, you need to understand the ins and outs of these types of markets very, very well before you go into it,” Mr Wong explained.

The LME will help design and develop the products, which will likely be offered in the local currency.

“We think the prospects are good, but we are still looking and talking to the market to make sure we have that analysed fully,” said Ms Liz Milan, managing director of LME Asia.

Ms Milan said they are quite pragmatic about how volumes and levels of interests in the platform are likely to be.

But given the strong performance of metals like copper and aluminium over the last few years, metals remain attractive to both corporate and retail investors, she said.

For the first six months of the year, volumes of lots traded on the LME grew by 7.5 per cent on-year to around 59 million lots, led by strong trades in copper futures and options. Steel trading also saw a 385 per cent increase in trading to 57,606 lots, the LME said.

So far, industrial metals traded on the LME fared well last week, as China’s imports in June remained strong, according to a commodities report by Societe Generale’s Cross Asset Research.

Weaker US dollar, plus falling LME inventories also provide more upside potential for base metals, especially for NICKEL, the

report added.— The introduction of metals futures on the Singapore Exchange is set to boost interests in metals trading in Asia and position Singapore as commodities trading hub.