Cotton auction will lead market trends in short term
27 May '09
1 min read
Analysts say that auction transactions of state cotton reserves will lead short-term trends in the market and recommend investors to pay attention to the spread changes between futures and auction price.
In order to meet cotton needs of textile industry and stabilize cotton market, the state has planned to sell 1.5 million tons of state cotton reserves accumulated over the years starting from 2003.
On May 22, National Cotton Exchange (NCE) first released 8,890 tons of 2008 reserves, but the auction process was not as intensive as expected, of which 4,991 tons were traded with the highest closing price being 13,260 Yuan per ton.
On May 25, NCE released another 9,204 tons of 2008 cotton, but trading volumes further fell to 4,402 tons. Under the impact of auction, Zhengzhou cotton futures price has started to decline since last week.
Main contract price was offered at 13,300 Yuan on May 22 and 13,135 Yuan per ton on May 25, the level moved closer to prices prevailing in the auctioning of state cotton reserves.