Compass launches China commodity index

Apr 25th, 2017 | By | Category: ETF and Index News

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Compass Financial Technologies has launched the Compass China Commodity Index (CCCI), the first index of its kind to track a basket of commodity futures, denominated in Chinese yuan, which are representative of commodity consumption in China. The index has been designed to underlie future investment products including ETFs.

Compass launches China commodity index

The CCCI covers futures contracts traded in China for 31 commodities across the energy, metals and agriculture sectors.

The CCCI currently has 31 components covering all commodity sectors and listed in China across the Zhengzhou Commodity (ZCE), Shangai Futures (SFE) and Dalian Commodities (DCE) exchanges.

To be eligible for inclusion, futures must pass a liquidity screen, and contract weightings within the index are determined by a composite of futures exchange daily volume and open interest, thereby mirroring the actual Chinese commodity market.

Currently, the largest component is thermal coal at 11%, followed by bitumen at 10% and coke at 7% and the commodity sector breakdown of the index is roughly 42% energy, 35% metals and 23% agriculture. (Data as of 31 March 2017)

Since the beginning of 2016, the index has risen by around 60% due to improvements in global economic conditions as well as a sharp rise in activity from Chinese speculators, in the form of hedge funds and retail investors, who have piled in to commodities after Chinese government reforms helped to reduce oversupply.  The large price increases together with spikes in trading volumes have prompted concerns amongst Chinese authorities of a potential bubble in prices that might spill over into producer and household inflation.

The index launch comes at a time when dominance in the setting of global commodity prices appears to have shifted to China, especially for heavily-traded futures such as copper, which is seen as a bellwether of Chinese economic health.

European investors looking for exposure to a broad commodity index may wish to try the iShares Diversified Commodity Swap ETF (Xetra: EXXY) which has AUM of €813 million and a TER of 0.46%, or the Lyxor Commodities CRB Thomson Reuters/CoreCommodity UCITS ETF (LON: CRBU), which has AUM of €793m with a TER of 0.35%.

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