SHFE paves the way for silver futures

Global Times | April 18, 2012 22:08
By Wang Fei’er

The Shanghai Futures Exchange (SHFE), China's largest market for commodities, issued a draft Tuesday, outlining the upcoming launch of the exchange's silver contract, China Securities Journal reported Wednesday.

The launch of silver futures trading on the SHFE will help silver-related companies hedge against silver fluctuations in the world market, give China more sway in determining global silver prices, and offer another investment option for the nation's small investors, experts told the Global Times.

China's miners, manufacturers, retailers and other enterprises, which rely on the precious metal, will undoubtedly welcome the start of domestic silver futures trading, which will allow them to hedge against fluctuating global silver prices, Li Ning, a gold analyst from Shanghai Cifco Futures, told the Global Times.

China's silver producers would likely short sell the contract in order to offset financial losses if global silver prices slump, while manufacturers will naturally turn to holding long positions in the future if concerns about rising silver prices emerge, Li explained.

The daily trading volume of delayed silver product at the Shanghai Gold Exchange skyrocketed by nearly 300 percent between September 2008 and September 2011, according to a report from Everbright Futures Co Ltd.

The country's high trading volume and booming demand for silver - which is a key component in high-end electronics, solar panels and luxury items - make this the perfect time to start silver futures trading in China, Li added.

The launch of domestic silver futures trading would also attract small investors with limited capital to the metal market, Sun Yonggang, a metal analyst from Everbright Futures Co Ltd, told the Global Times.

Unlike the gold futures contract, which is priced beyond the reach of many small investors, investing in silver futures could require a cash outlay of as little as 6,000 yuan ($951.97), Sun calculated based on the draft.

The SHFE's draft sets the minimum margin rate of silver futures contract at 7 percent, and its trading unit at 30 kilograms.