New contracts, options

Press, 22 June 1985, Page 22

New contracts, options

New futures contracts are being considered on a shareprice index, Government stock, the consumer price index, and the Reserve Bank index of the New Zealand dollar against a basket of currencies. The New Zealand Futures Exchange is also investigating options on futures. Mr A. D. Shadwell, the chairman, told a function after the exchange’s annual meeting in Auckland on Thursday that the share contract would be based on an index being formulated by the New Zealand Stock Exchange. “We are co-operating with them and both support the concept of moving towards a real time share index as soon as is practicable, complemented by a futures contract at the NZFE,” Mr Shadwell said.

gating trading options on all of its contracts.

Two types of options are traded overseas: traded options, which can be sold, and others which lapse if they are not taken up. The advantage of options is that they offer traders the chance to limit risk by setting a floor to price movement. Wool

Wool-contract prices recovered sharply yesterday after falling for a number of days. The fall had been caused partly by a strengthening of the New Zealand dollar, and sentiment that because of this wool futures might be too high. Mr Geoff McDonnell, of Mair Futures, Christchurch, said that with news yesterday of a substantial scoured-wool export deal being signed with Iran worth $35 million, and news of more Chinese buying delegations visiting New Zealand, it was becoming evident that a very delicate supply and demand situation would present itself next season, demand outweighing supply. “In addition, other countries’ currencies are strengthening against the U.S. dollar, which makes it easier for them to buy our wool. Indications are with the inquiry being received New Zealand wool will be in short supply next season. Futures prices are cheap and we can se*e profit of up to $3OO per lot per long position in the next three weeks.”

As reported yesterday, the wool contract, which has until now been traded by telephone-conference calls in New Zealand during the day, and in London at night, will be transferred to the New Zealand exchange from July 1. Ninety per cent of the trades in this contract are being made in New Zealand. It is believed that the exchange may also look at running a wheat contract, if the New Zealand wheat industry is deregulated. The exchange is investi-

Dr Brent Layton, of Marshall Futures, Christchurch, said wool-contract prices started the week with an easier tone, and drifted downwards until Thursday before Friday’s sharp recovery. He agreed with Mr McDonnell on the causes of the decline and rise. “Futures look set to go higher and we favour long positions at present price levels,” Dr Layton said. U.S. dollar Prices for the U.S. dollar contract dropped sharply during the first three days of the week, but bottomed out at the

close of trading on Wednesday, Dr Layton said. Volume of turnover was high as a result of the volatility of prices. He attributed the strengthening of the “Kiwi” dollar early this week to several factors. “The Budget contributed to turning sentiment in favour of the New Zealand unit. The delay in the introduction of GST made it clear there would be no importing splurge later in the year as many were expecting, and also lowered the N.Z. inflation rate expected by market participants.” Mr McDonnell, of Mair’s, said that on the international market the U.S. dollar was easier this week trading around 2.99 to 3.07 Deutschmarks, and £1.27 to £1.30, finishing the week on the "upside” as a result of the healthier-than-expected flash forecast of U.S. second quarter GNP Growth. "Within New Zealand the foreign-exchange market has reacted as substantial funds are being brought in from offshore, the conjecture being that large Euro-dollar loans — several lots of SUSSOM — are being drawn down, making the ‘Kiwi’ dearer to buy. “However, we can see this as a short-term phenomenon only. New Zealand importers will soon start paying offshore accounts. In the meantime, we see resistance on the foreign exchange market at 2.4670 to . 2.4680, and would encourage the opening of long positions.” PDP’s A slight change in sentiment this week in the commercial

WOOL FUTURES MARKET WEEK ENDED JUNE 17 Trading Traded prices Total Open months This week To date this • cont’s Wool High Low Last High Low week

bill (prime commercial paper) contract as some traders de- '' cided that the fall in interest rates across the board might 4 not be that significant, Mr McDonnell said. (Y This was especially so when some corporates were being advised that their bank over- 1 draft rates were being increased. 4 “However, the futures mar- — ket may have over-anticipated the fall in interest rates as traders seemed to start fav- i ouring the short side of the ? index from Wednesday onwards,” he said. “In the meantime, we would “ favour opening long positions * in September, 1985, around - 760.” c Dr Layton said that PCP ■* prices were relatively stable J during the week, the most « actively traded months — ' August and September — bob- * bling around 23 per cent. > Volume was moderately high <. in view of the stability of » prices. J “There is still considerable * uncertainty about the direction j of interest rates in the short term, but the consensus is that ’ they will eventually fall,” Dr t Layton said. »

SUS CONTRACT 85 Open H/L Last Vol June 2.1485 .1540/416 .1450 33 July 2.1800 .1880/725 .1750 58 Aug. 2.2215 Contracts .2215/005 .2175 traded: 103. 12 COMMERCIAL BILLS 85 Open H/L Last Vol July — - 7630 4 Aug. 7685 7685/75 7685 15 Sep. 7685 7690/70 7688 17 Dec. 7980 7980/70 7975 9 Mar. — 7850 6 Contracts traded: 51.

Aug ’85 539 535 539 544 445 40 417 Oct ’85 539 535 539 556 472 46 343 Dec ’85 538 534 538 560 473 27 241 Jan ’86 539 535 539 560 474 36 353 Mar ’86 548 544 544 560 492 50 248 May ’86 556 550 556 565 543 60 - 270 Aug ’86 569 564 569 571 549 8 151 Oct ’86 566 566 566 574 549 1 28 Dec ’86 567 566 566 571 566 3 19 Totals 271 2070 Tenderable stock: 1217 bales. 35F2D quotes — 529 as at June 6.