REPORT: A Chinese investor has built up a $2.8 billion bet that copper prices will rise

• David Scutt, Business Insider Australia

• 10h
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Humpback whales breached in unison off the coast of Sydney, Australia.Jonas Liebschner / Whale Watching Sydney. Used with permission.

• Copper prices have jumped in recent weeks.
• A private coal mining industry investor in China’s Shanxi province reportedly built up a $2.8 billion long position in copper contracts.

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Copper prices have been on a tear this year, especially in recent weeks, with prices jumping to the highest levels in close to five years.

A strengthening global economy, particularly in China, the largest consumer of the metal — along with strong price momentum, a weaker US dollar, and supply constraints — have proven to be a potent mix.

Just look at the front-month copper futures contract on the Shanghai Futures Exchange as evidence as just how bullish the recent price action has been.

SHFE Front-Month Copper Future. Thomson Reuters

However, it’s not just the price action that is looking bullish right now.

One Chinese investor is also feeling optimistic on the prospects for Doctor Copper, building up a mammoth long position in futures on the Shanghai Futures Exchange.

According to reports from Reuters citing an unnamed source, a private coal mining industry investor in China’s Shanxi province has built up a $2.8 billion long position in copper contracts due to expire in April, May and June next year.

Reuters says the position has been built up over the past year through futures broker Gelin Dahua, with the firm currently holding more than 35% of all open interest in copper contracts for the first half of next year.

For April, May and June contracts, that concentration becomes even greater with Gelin’s positions accounting for at least 60% of the total open interest.

While the identity of the buyer is unknown, if Reuters’ source is correct, it appears there’s new copper “whale” helping to drive the bullish price action seen in recent months.

And, adding to intrigue, it’s a reported to be a coal miner, seemingly diversifying away from the bulks to base commodities.

The only question now is whether it will be joined by other buyers, or, conversely, will it lead to other traders betting against the whale given the vulnerability such a large long position carries should copper prices suddenly come under pressure.

No one knows that answer, but it will be interesting to watch the price action in these contracts in the period ahead.

Trade in Chinese commodity futures has flourished in recent years, aided in part by attempts from policymakers to quash speculative activity in the nation’s stock and housing markets. Tighter capital controls introduced in China earlier this year, limiting investment opportunities abroad, may also be a contributing factor helping to underpin activity levels in futures.

Reuters has more here.

Read the original article on Business Insider Australia. Copyright 2017. Follow Business Insider Australia on Twitter.

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The stock market just made history

• Akin Oyedele
 

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Scott Olson/Business Insider

• The S&P 500 on Monday broke its previous record of the number of days without a 3% drawdown.
• As it's continued to make new highs, it has broken records of other percent-move sizes.
• These illustrate the rock-bottom volatility that has characterized stocks this year and is showing few signs of rising anytime soon.

2017 could go down as one of the most boring years ever for the stock market.

Sure, the S&P 500 has closed at record highs 66 times this year, the most since the mid 1990s. 

But volatility has remained historically low. And on Monday, the S&P 500 completed its longest streak ever without a 3% intraday drawdown. At the close, it overtook the previous record of 241 days set in 1996.

Here are three other stats that illustrate the market’s lull, via LPL Financial:

• As of Friday, the S&P 500 had gone 33 straight days without a 0.5% drop, the longest streak since 1995.
• The S&P 500 has fallen by 1% or more in a single day only four times this year, the fewest for a full year since 1964.
• Its average daily close on an absolute basis has been 0.3% this year, the lowest since 1965.

"I feel like a broken record, but so many times when I’m talking about 2017, I usually say 'the last time since 1964, 1965, or 1995' when making comparisons to 2017," said Ryan Detrick, a senior market strategist at LPL Financial. "Those three years are widely considered the least volatile years ever, and 2017 is right three with them trying to make them medal stand."

LPL Financial

There are several reasons why volatility — at least to the downside — has remained so low. Many economies across the world are growing, there are few signs of recession in the US, and companies are reporting earnings growth. A s Bank of America Merrill Lynch's Michael Hartnett recently put it, the "best reason to be bearish in Q4 is there is no reason to be bearish." 

"Almost everything [in markets] has been great in 2017,” said Michael Jones, the chief investment officer of RiverFront, at a BlackRock press briefing on Friday. " The basic risk backdrop has changed dramatically. Last year the market would wig out and go through periods of volatility, and this year, the market has kind of ignored all that." 

Jones used South Korea’s stock market as an example. The Kospi, up 23% this year, is one of the best performers globally despite the escalation of North Korea’s nuclear tests. On one hand, markets can believe a nuclear disaster would be averted, Jones noted. On the other hand, we all die.

Investors in US markets aren’t betting on less extreme shocks to the bull market like changes in monetary policy with a new Federal Reserve chair. According to Credit Suisse, short-dated implied-volatility options are well below average and are making new lows. 

Credit Suisse

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