CHINESE investment funds expect the price of most base metals to move in a narrow range for much of this year and so see little incentive in betting on them, preferring to put money into local equities instead.

    Many Chinese funds are switching into the red-hot stock markets on the mainland and in Hong Kong to seek high returns, sources at three Chinese funds said.

    “Copper is boring ... We don’t see high prices on commodities [in the near term],” said a source at a large investment fund.

    “We don’t hold much in the way of positions. We are now in a wait-and-see stance,” said the source, whose firm had held large short positions on copper earlier this year.

    China’s recent measures to support the economy should help metals eventually but the fund would take long positions only when it saw real signs of rising demand for physical metals, she said.

    The fund had increased investment in equities, whose rise looked like a sure bet at the moment, she added.

    Copper on the London Metal Exchange (LME) has lost more than 1 percent this year, aluminim has fallen more than 4 percent and nickel more than 10 percent.

    In contrast, Hong Kong stocks flirted with seven-year highs Tuesday and the Shanghai Composite Index was at its highest level since early 2008.

    “My boss now is focusing on equities,” said a source at another large Chinese fund, adding that the fund had covered most of the short LME copper positions it built in October 2014 and January 2015 and liquidated its long zinc positions.

    He believed metals were unlikely to have any big ups and downs for the rest of the year, although Chinese demand should rise slightly in the second half due to the government’s economic stimulus.

    “Many investment funds have increased equities in their portfolios. There is a lot of pressure on them to generate returns in a bid to get a good ranking,” said an executive at a commodities hedge fund.

    While cutting positions on LME metals, the executive said his fund had increased positions in agricultural products as well as put bets on equities in the second quarter.

    (SD-Agencies)