From the DOW JONES NEWSWIRES

UPDATE:China SRB Bans Its Units From Futures Trading
By Rick Carew

BEIJING (Dow Jones)–China’s State Reserve Bureau, which manages the country’s strategic reserves of commodities including oil, copper and grains, said Tuesday it would ban its units from trading in a broad range of financial instruments such as commodity futures, “to avoid more huge losses on its investments.”

The move comes within months of revelations that Chinese trader Liu Qibing went missing after building millions of dollars worth of loss-making copper short positions on the London Metal Exchange.

The bureau initially denied Liu worked for it, but it later emerged he was trading on its behalf through the State Regulation Center of Supplies Reserve, or SRCSR, a body affiliated to SRB.

The statement Tuesday was the first time the bureau acknowledged large losses on its investments and the new rules appear to be aimed at closing a loophole that allowed government departments to trade derivatives without explicit permission.

The new rules also banned the SRB’s units from trading shares, and foreign exchange and corporate bonds in the domestic and overseas markets. It also banned overseas investments.

While SRB is yet to officially acknowledge Liu traded for the government, the statement said “those who make unapproved, independent policy-decisions on investment will be dealt with severely.”

Copper prices on LME have been firm throughout last year on fundamental factors such as supply constraints, but prices rose particularly from mid-October, fueled by fears that SRB may find it difficult to cover the short positions without buying from the market.

Eventually, the positions were partly rolled over and partly covered by buying back from the market while China also made some deliveries, reportedly to LME warehouses in Busan, South Korea.

“Obviously there has been a problem and they’re managing the problem. This is just another way of curtailing any further activity for the timebeing,” said a Hong Kong-based LME trader.