Regal Group International: Copper and tin could extend rally in spite of China’s increased rates.

Oct. 20, 2010 - PRLog -- The recent decision by Beijing to increase borrowing costs for the first time since 2007 should not curb gains in copper and tin, analysts have informed Regal Group International, and it appears unlikely that demand for these and other metals will suffer in the world’s biggest metals user.

“It’s not a big increase and is unlikely to have much impact except bring about a knee-jerk reaction, but it signals the government’s attitude toward wanting to rein-in liquidity and fight inflation, rising property and food prices,”  a trader at Jin Yuan Futures Co. in Shanghai told Regal Group Intentional sources.

Some analysts said that the move could see a temporary retreat of speculative money but that would be short lived.

China’s central bank has decided to increase the benchmark one-year lending rate from 5.31% to 5.56%, and the deposit rate from 2.25% up to 2.5%, in a move that took most economists by surprise.

“Looking at history, the rate-increase cycle usually accompanies gains in metals prices, so the decline will probably be a temporary thing,” an analyst at Everbright Futures Co. said.

Copper has realized a 13% increase this year on the London Metal Exchange and reached a 27-month high of $8,492 a metric ton recently, Regal Group International research shows, while tin jumped 56% this year, making it the best performer on the metal exchange, reaching a high of $27,338.5 a ton in October.

The London Metal Exchange index of six industrial metals is up over 11% for 2010.

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