Risk currencies such as the Canadian Dollar (CAD) and Aussie Dollar (AUD) will be risk gauge on China interest rate hikes. We see some substantial sells (risk crosses/FX) after the coming weekend 11th, 12th Dec 2010 (China rate hikes), stocks will be hit hard.
Reuters Dec 9 2010
"* China slowdown bigger fear than U.S. regulation
* Possible price bubble in commodities another worry
* Absolute returns top reason for investing in commods
* Copper seen top gainer in 2011, followed by grains, oil
NEW YORK, Dec 9 (Reuters) - Commodity investors now fear a
slowing Chinese economy more than U.S. financial regulations
and many worry of a bubble if markets keep rallying with little
heed to fundamentals, a survey by Barclays Capital found.
Absolute returns, or profits, remained the main reason for
investing in commodities for a second straight year -- compared
with the traditional objective of portfolio diversification.
But while investors saw the potential for further upside in
commodities from continued economic recovery, they expressed
wariness over growing risks in China and the sharp price run-up
in many markets of late, the survey showed.
"China is a bigger concern now than before," Kevin Norrish,
BarCap's director of commodity research, told reporters on
Thursday as the London-based investment bank unveiled the
findings of its sixth annual commodity investors survey.
"This time last year, there was no concern about liquidity
tightening in China. But the inflation in food prices and the
property market bubble has changed that," he said.
"Now there's concern that if something goes wrong, policy
could tighten up too quickly and interest rates would go up
faster than anticipated, hitting demand for almost everything
China consumes."
Investors in last year's poll cited U.S. financial
regulations as their top concern, amid moves to rein in Wall
Street post-crisis. A raft of new laws have surfaced since,
including limits on the amount of proprietary money a bank can
bet on a market.
This year's survey revealed concerns about a possible price
bubble after a number of niche commodities, including cotton
and silver, hit multi-year highs and posted wild price swings
as futures exchanges upped trading margins, or deposits.
"I think markets such as copper and crude oil could
continue doing well but the others, where the fundamentals are
more suspect, could fall back quite a bit," Norrish said.
The survey showed copper as the commodity best poised for
returns in 2011, securing 26 percent of the votes from the more
than 300 respondents, who included pension fund managers, hedge
fund traders and high net worth individuals.
BarCap has a price target of $9,950 for a tonne of copper
on the London Metal Exchange CMCU3 by the third quarter of
2011, compared with Thursday's record high of $9,091.
Norrish said he believed the metal, used largely by the
construction and power industries, "has potential to strike
$10,000". [ID:nN09242729]
Grains took the second-highest number of votes in the
survey on expected price gains, at 23 percent, while crude oil
came in third, with 19 percent."
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