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Gateway to New Horizons of Opportunity in China Commodities – Euromoney magazine

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The world of investment opportunity has shifted on its axis. New horizons are opening up, old certainties are being shaken, the spread of wealth is becoming more diverse – and the outlook for progressive investors has never been as intriguing or exciting.

In response to the shifting tectonic plates, Bank of China International (BOCI) – China’s first investment bank and the top Chinese investment bank overseas in terms of overall capabilities – has launched the BOCI China Commodities Index.

The index is a suite of commodity indices that track the major onshore China commodities futures market and is the first China-focused commodity index to be launched by an offshore Chinese investment bank.

It offers investors a transparent and liquid benchmark on this market at a time of seismic change and opportunity as China begins for the first time to open its commodities market to offshore participants in an era of unparalleled change and development across Asia.

The index aims to provide a benchmark on the Chinese commodities market for global investors, filling a void in the commodity index space that is currently dominated by benchmark indices tracking offshore commodities. It is designed with the support of BOCI’s expertise and profound understanding of the domestic market.

Global interest

The BOCI China Commodities Index currently comprises a diverse basket of 25 commodities divided into five sub-indices, covering agriculture, base metals, ferrous metals and materials, energy and industrial chemicals, and precious metals.

Its launch comes at a time when international attention and interest in China’s commodities futures market is growing as the market slowly begins to open up.

Li Tong, chief executive officer of BOCI, says: “Internationalization of China’s commodities futures markets has been a major theme this year with the launch of INE Crude Oil and DCE Iron Ore. This has attracted the attention of both onshore and offshore investors.

“BOCI has a unique positioning in the market and we are able to combine our solid understanding of the Chinese domestic market with our comprehensive international platform. By launching the index, we will endeavour to provide market participants with better insight into China’s domestic market.”

Market leader

BOCI is a market leader among Chinese financial institutions in the commodities sector. It is the first Chinese bank to have obtained clearing membership in a variety of international commodities exchanges, including the CME Group, Intercontinental Exchange (ICE), and the London Metal Exchange.

The bank has commodities trading embedded in its DNA, creating a highly respected global team in Hong Kong, Shanghai, London, New York and Singapore, and continues to expand its platform and product offerings to clients in China and overseas.

“We are focussed on the internationalization of the Chinese commodities market,” explains Arthur Fan, BOCI’s global head of commodities. “The index is a very exciting development and we are in a good position to service our clients. The launch of the BOCI China Commodities Index further enhances our capability in servicing our clients and expands our global footprint.”

For global investors, the China commodities market is now “too big to ignore”, argues E-Lei Lau, head of BOCI Commodities Structured Products. “The main differentiating factor of this index compared with the existing global benchmark commodity indices is the composition of the index,” she says.

“It includes many commodity underliers elements that are only liquidly traded in onshore China, in particular in the ferrous metals and petrochemical sectors. The inclusion of these unique underliers representative of the Chinese commodities market further highlights the case for diversification from traditional commodity benchmark indices.”

Dynamic growth

The launch of the BOCI China Commodities Index comes at a time of global change with China’s visionary Belt and Road initiative creating vast new business opportunities throughout the world, particularly in commodities and related sectors.

With its leading position in the fields of commodity trading as well as IPOs, stock trading and bond issues, and its unrivalled expertise in the capital markets of China, BOCI is ideally placed to mine an emerging seam of possibilities in commodities.

The index is a unique global platform where Chinese and overseas investors tap into an era of progress as extraordinary and ambitious infrastructure projects shape the 21st century and transform the lives of hundreds of millions of people.