China Deleveraging

OANDA senior trader Stephen Innes said stronger-than-expected first-quarter economic growth had provided Chinese authorities with room to move on economic deleveraging. “Investors have little option but to comply and reduce positions, [but] the underlying fundamentals win out at the end of the day,” he said.

The impact of the Chinese credit crunch on the iron ore downturn has been much debated. “Mainland investors view commodities as a US dollar hedge on the anticipated reflationary trade,” Mr Innes said. Iron ore fell 2.5% to $US66.53 a tonne on Tuesday, after falling 25 per cent in the past month.

While it’s possible a reduction in such speculation – due to the capital crackdown – is behind the asset’s rapid falls, Mr Innes points out that periods of high speculation also tend to be accompanied by high capital outflows. This hasn’t been the case recently, leading him to think iron’s price movements have more to do with the metal’s global supply glut.

The Sydney Morning Herald

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes