Emerging markets are consuming more food and hence the rising global demand for corn, wheat, pulses, metals, Crude Oil or just about any consumed commodity.Analysts have often repeated the same arguments favouring a bullish stand on commodities in 2010 and early this year . But investors often look for more convincing data before they can actually think of investing in a new asset class.
The CNN Money Best Performing stocks of 2011, only three commodity companies managed to get in the list: Dean Foods(Nyse:DF), a leading dairy producer, at number seven with a year to date return of 43% and market capitalisation of $2.3 bn, El Paso Corp (NYSE: EP), owner of USA's largest Natural Gas pipeline network whoe YTD performance is 44% and market capitalisation is at $15.2 bn and Cobot Oil and Gas (NYSE: COG) witha YTD performance of 59% and market capitalisation of $6.3 bn. Apart from top performer, National Semiconductors (NYSE: NSM) with a YTD performance of $5.9 bn and Netflix (NYSE: NFX) at second position, most of the firms in top ten belong to the health care sector.
In India too commodity returns especially in agriculture have fallen in line with global trends. Dinesh Thakkar, CMD of Angel Broking has told Economic Times that softening of commodity prices are set to continue on slower economic recovery. This augurs well for equities in India and BSE sensex may surge higher as input costs may come down for corporates.
But falling commodity prices may also be an inducement for players to enter the market, according to some analysts. Investors expect to increase commodity investments over the next 12 months, even though short-term uncertainty is keeping them on the sidelines for now, according to a new survey by Credit Suisse.
Credit Suisse conducted the survey as part of its inaugural 2011 New York City Commodities Day on Tuesday, June 28, with a gathering of nearly 400 clients covering a wide cross section of institutional investors, retail distributors, mutual funds and hedge funds.
The survey found that 36% of investors classified themselves as currently "underweight" in commodities, with a further 10% having zero exposure. However, when asked about their expected investment level over the next 12 months, 40% expected to become "overweight" commodities and only 3% as still having zero exposure.
Two-thirds ( 65%) of respondents believe that commodities prices in 12 months will be around current levels or higher, with roughly half of those expecting prices to be at least 10% higher. That compares with only 13% that expect prices to be at least 10% lower, but a significant proportion (23%) admitted to having "no idea".
Despite the recent moderation in oil prices, investors remain bullish on crude oil, with 76% believing that the oil price has yet to peak. Dismissing a dominant role of market speculation in determining oil prices, 72% said they believe energy prices are primarily driven by market fundamentals. Copper remains the favorite base metal, with 59% seeing it has having the best 12-month outlook of the group. However, the price path for commodities is expected to remain challenging, with 55% expecting realized price volatility to increase over the next 12 months.
The survey also examined the trend away from broad market benchmarks into more specialized products for commodity exposures. 45% of respondents said they view commodity ETFs as likely to receive the greatest asset flow, while 40% saw active indices and fundamentally based directional trading as the key growth areas. In comparison, only 5% said beta benchmarks will be growth products within commodities. In a separate question about Dodd-Frank regulatory changes, 74% said they expect no significant impact on their commodities investment activities.
"Overall sentiment towards commodities as an asset class is constructive, but investors are under allocated due to concerns about short term direction and volatility," said Oscar Bleetstein, Head of Commodity Investor Sales for the Americas at Credit Suisse. "However, the survey confirmed our views that if and when confidence starts to return, investors are likely to increase exposure significantly and find managers or products that can accommodate this new environment."
Meanwhile Bloomberg has reproted that funds have reduced exposure to commodities on speculation that slower global growth will curb demand for metals, energy and grains. "Speculators cut their net-long positions in 18 U.S. commodities by 15 percent to 958,309 futures and options contracts in the week ended June 28.
No comments:
Post a Comment