Market Report: China unwinds WMPs

Informed sources in China say that the authorities are deliberately forcing wealth management products to unwind their long commodity positions. These WMPs, as they are commonly known, are speculative investment vehicles that promise attractive returns to private investors, and collectively amount to a financial bubble. There are two reasons why the government has intervened. The massive expansion of bank credit in recent years causes excessive speculation that cannot be allowed to get out of hand. Furthermore, WMPs were pushing up the prices of the commodities being accumulated by the government as part of its economic plan.

Gold and silver declined sharply this week against a background of carnage in commodity markets, driven by Chinese liquidation of base metals.

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First published here: Market Report: China unwinds WMPs

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