China's "unprecedented in world history" money creation leads to an unending series of financial bubbles. This time apples...
The real estate, stock and bond markets soak up a lot of capital, but with no major rally in stocks and bonds and a crackdown on real estate underway, speculators are pouring into any asset they can find. In this case, apple futures. Not the stock. The fruit.
Volume in APPLE FUTURES on the ZHENGZHOU COMMODITY EXCHANGE was $60 billion (dollars not renminbi).
The trading volume on the Shanghai and Shenzhen stock markets was $63 billion.
SCMP: Which is more tasty? China’s apple futures craze, or mainland’s stock market
An apple frenzy is gripping China, as the country’s recently launched futures for the fruit hit a fresh record high on Wednesday, attracting nearly US$60 billion of fund inflows, close to the combined turnover of US$63 billion for the Shanghai and Shenzhen stock markets.
...Since the beginning of April, the price for the October delivery contract has soared around 40 per cent.
“A trigger [for the price surge] is the recent cold snap in northern China, which has fuelled expectations of a sharp supply cut this year,” said Hou Zhifang, a futures analyst for Founder CIFCO Futures.
A trigger, but not the cause. The cause is the PBoC.
Officials are reacting with higher trading fees.
21st Century: “疯狂”的苹果期货 “懂期货的不懂苹果，懂苹果的不懂期货”？ (Crazy Apple Futures, "Those who understand futures don't understand apples, those who understand apples don't understand futures)
On May 15th, the turnover of Apple's 1810 futures reached 252.8 billion yuan, and the instantaneous market share of Shanghai and Shenzhen was 162.99 billion yuan and 215.12 billion yuan respectively.
...Behind the "crazy" Apple trading volume is that this new breed of futures is playing a vigorous short-term rally in the past month. Since the beginning of April, the 1810 futures price of Apple's main contract has risen from 6,500 yuan/ton to a maximum of 9,235 yuan/ton. In just one and a half months, the cumulative increase has been as high as 38.75%.
Wang Ping calculated for himself an account. If he can hold a long position so far, according to 5 times leverage, the actual investment return in the past month is as high as 190%.
"But I quit in mid-April, because I think it's more like capital's foolishness," he said frankly. The experience of investing in the futures of apple futures for more than a month has led him to discover an interesting phenomenon: If he understands futures, he does not understand Apple, and he understands that Apple does not understand futures. So Apple Futures became a game for realizing wealth transfer between hot money.
With the wave of apple futures hype, regulatory authorities have begun to take measures.
Once the bubble in apple futures is over, what's next? I have no idea, but I know one thing for sure: this giant wave of liquidity will eventually find its way into gold. Especially in light of tight capital controls, it'll be the best place to hide from currency depreciation. And if apple futures volume can match the stock market, gold futures will one day dwarf the stock market.