NEW YORK Feb 8 U.S. copper futures narrowed their losses by the close on Thursday when some participants gained confidence in the metal's buoyancy following news that Red Kite shareholders approved extending a redemption notice for shares in the hedge fund, traders said.
Red Kite, a roughly $1 billion fund that specializes in metals and is nursing double-digit losses after 190 percent growth in 2006, pressured metals prices last week when news of its mammoth losses hit the market.
Asked if copper traders could have read Thursday's shareholder approval as a sign of confidence, a New York metal dealer said, "Yes, I think they probably did."
Copper for March delivery HGH7 closed down 0.45 cent at $2.4505 a lb. on the New York Mercantile Exchange's COMEX division. Overnight losses lead down $2.3855, nudging Friday's low at $2.3850, which dates back to early April.
Spot February copper HGG7 trimmed its decline to 0.25 cent at $2.4385 a lb. The rest finished 0.30 cent lower to flat.
Red Kite said on Thursday its shareholders "overwhelmingly" agreed to a longer notice period before exiting the fund.
Last week it asked investors to approve extending the redemption notice to 45 days from 15 days before the end of the quarter. On Thursday, approval was passed and investors said the fund's top-10 institutional shareholders all backed the plan.
"They asked their shareholders for an extendsion and the shareholders granted it to them, which implies that there isn't a big panic among shareholders. And they have their shareholders confidence," a copper dealer said.
He added that even a substantial decline after 190 percent gains still represents huge returns for the fund.
"Net net, if you tell me I can invest in something and after 2 years you're still gonna be up 140 percent, I think that's still a pretty good return. And that return still attracts money," the dealer said.
Earlier, copper prices had slipped neared 10-month lows when funds sold short, but support held. trader said.
"I think funds were not getting out of (copper) positions, but adding to shorts. And I think that's healthy for the market. It's a more realistic level. And what a market needs to go up is to have shorts in it," he said.
"If you want the market to go up the best way to do it is to get the shorts to cover. In the end, I think that will be a driving factor of copper, will be short covering," he added.
Even before the Red Kite news was released, some short-term speculators and other copper participants bought the red metal, seeing an opportunity at the lows.
London Metal Exchange-monitored warehouse stocks edged down 25 tonnes to 215,725 tonnes on Thursday. COMEX stocks were unchanged at 36,643 short tons on Wednesday.
COMEX estimated final copper futures volume at 12,000 lots, fewer than 18,540 lots on Wednesday. As of Feb 7, open interest in COMEX copper futures dropped by 1,184 lots to 70,851 lots.
LME three-months copper MCU3 ended with a $15 decline at $5,410 a tonne after tumbling 3 percent overnight. It hit a low at $5,270 a tonne in London as funds unloaded long positions and took out short positions.