Chinese speculators move from housing to futures

Housing Bubble Crackdown Sparks Market Turbulence and Frantic Trading on New Stock Index Futures
For the first three trade days, the ratio between trade volume and position value has been 18 to 1, 27 to 1, and 32 to 1, respectively, well higher than international standards. In a mature stock index futures markets the ratio would be closer to 1 to 1. For example, on Tuesday, the ratio of trade volume to position value on the Nikkei 225 stock index futures, and on the Singapore Stock Exchange it was 0.4 to 1. On the domestic commodities futures market, for copper, the ratio was 1.2 to 1. The high ratios indicate the speculative nature of the market and that traders are making many rounds of buying and selling in a single day. Many are making arbitrage transactions in minutes.

So far, few institutional traders show any interest. Many traders are seasoned commodities futures speculators. Analysts say the ultra-short term trading may be to get risks under control, since traders are very sensitive to the fluctuation of prices and will quickly clear positions before huge losses and margin-call soccer.

A lot of domestic hot money is joining the game. In particular, Zhejiang speculators, some of whom are moving money from their housing market positions to the futures market, are trying to find a new quick money instrument.

The plentitude of liquidity is nicely conducive to the fledgling stock index futures market. Beijing's housing-market crackdown is forcing more speculators to sell and turn to new bets. China's housing market, estimated at 100 trillion yuan, dwarfs the stock market. Meanwhile, after the nationalization of thousands of coal mines, hundreds of billions of yuan from recently paid-off private mine owners is still looking for parking places.
While many people expected the futures market to reduce volatility, I expected it to increase volatility, as the market figures out how to use futures. And the overall weakness in stocks doesn't help...

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