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Wednesday, March 30th, 2011
copper angles

A posting by Izabella Kaminska on FT Alphaville yesterday caught my eye.  It was entitled, “Chinese ‘copper financing’ got even more popular this month.”  I find both “angles” of the story (based on work by Standard Chartered) of great interest.

First, copper as collateral.  What could go wrong?  It’s as good as . . . copper, I guess.  (It doesn’t go down, so not to worry about collateral calls or anything like that.)

Then, has demand for copper softened in China?  I mean, other than as collateral.

China and copper have been intertwined for quite some time now in the minds of investors, even as the performance of the Chinese market has diverged dramatically from that of copper.  The chart above shows the respective returns since the end of 2008.  Obviously, the comparison is between “stuff” and “paper,” but it’s striking nonetheless, just like the Alphaville article, which deserves to go into the archives for a “remember when” column to come.  (Chart:  Bloomberg terminal.)