April 24, 2020
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Not too long ago we wrote about how Chinese futures volumes had joined the BILLION contracts club, of interest to us in that we’ve been involved for a few years now on getting US and European quant models implemented on these exact Chinese markets for Chinese investors. The idea is that the nascent (but quickly growing) markets are like the good ‘ol days in US futures with lots of directional volatility, volume, and liquidity.
But, what does that look like when the whole world is shut down and countries GDP numbers are getting cut with chainsaws. China, for example, saw its first decline in economic activity in half a century! 50 years!
We know US futures volumes are up during the crisis as investors and businesses rush to hedge and/or speculate on things like Oil going negative, but what about futures volumes in the country where this all started… we decided to take a look.
Exchanges:
- The four main Mainland China futures exchanges saw growth of +18%, +76%, +79%, and +122%.
- Dalian Commodity exchange has hit triple-digit growth thanks to Eggs with a +874.19%.
- Commodities continue to dominate the overall increase in Chinese futures volumes increase.
Commodities:
- Top 5 commodity volume increases: 1. Eggs (874.19%) 2. Tin (476.35%) 3. Fuel Oil (421.16%) 4. Palm Oil (411.43%) 5. Apple (408.69%).
- Egg futures increases are tied to sharp gains in pork prices after disease devastated the country’s hog herd. (more on that here)
- Across all commodities both positive and negative, Chinese futures gained +72.34% from 2019-2020.
Indexes:
- A +125.63% increase in the CSI 500 index is a good sign for those invested in A-shares. This represents the top 500 A-Share stocks after excluding both the CSI 300 Index constituents and the largest 300 stocks. The Index reflects the overall performance of small-mid cap A-shares.
- 5 year treasury bond is +253.33% means investors are increasingly confident in Chinese bonds.
As the effect of Coronavirus play out, the country of China has started to resume life as “normal”, and even with economic hardships, the sky seems to be the limit for these markets and the exchanges. We continue to have boots on the ground in mainland China who are resuming meetings with at the brokerages, exchanges, and asset management firms utilizing these markets – and we’ll be sure to report back how this all shakes out by the end of the year.
Check out some related content: Trading Chinese Futures Markets with Abingdon Global Podcast
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