“China is set to tighten supervision of domestic companies trading futures overseas following a US$550m loss in derivatives posted by China Aviation Oil (Singapore) Corp, state press said Friday. An official from Sinochem, one of 17 state companies currently allowed to trade futures in selected overseas exchanges, was quoted by China Daily as saying “the regulators are very cautious”. He and other industry experts were cited as saying supervision was expected to become stricter after CAO’s losses. CAO, listed and headquartered in Singapore but majority-owned by the Chinese state-owned China Aviation Oil Holding Co, posted the losses when oil prices surged to as much as 55 dollars when it had bet that prices would fall.”
You would be a fool to bet against Chinese growth in the years to come. But when you read that a state-owned business was betting against oil price increases and then blew up, you must pause. I seriously doubt anything that is state-owned will be able to ever compete against the world’s great capitalists and speculators — and win regularly. The market is a tough place and if you are not ready to play with the big boys, they will teach you a lesson.