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Funds Flowing Back to International Bulk Commodity Market

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2014-07-30 17:58:16 来源:和讯网 

  Showing eye-catching performance among the asset classes in the first half of the year

  Affected by the gradually accelerated global economic growth and other factors, in the first half of the year the international bulk commodity market unexpectedly reversed the decline with the overall growth surpassing that of the stock market and the bond market and the funds attracted to flow back slowly. In addition, the continuously improving fundamentals and the picking up of the prices of metals especially the aluminum and zinc have attracted not only the funds from the agricultural products and other markets but the inflows of new external funds.

  According to statistics recently released by Citibank, this year the bulk commodity market has seen a net funds inflow of about US$ 9.1 billion, including the relevant index swap products and the commodities traded at commodity exchanges. However, the gap of US$ 28.7 billion that withdrew from the bulk commodity market at the same period last year has not been fully met.

  After the financial crisis in 2008, due to the weak demand for raw materials, the bulk commodity market prices were severely suppressed, and the sharply declining ROI in the field have caused the investors to turn to investment in other asset classes. According to estimates of Citigroup, in 2013 the bulk commodity market suffered a fund outflow of US$ 50 billion. At the same time, the Volcker Rule implemented in the United States after the financial crisis has put the banks in more stringent regulatory environment with some large investment banks successively cutting related businesses and withdrawing from the bulk commodity market. Compared to the previous prosperity, the bulk commodity market is obviously in the doldrums.

  In the first half of this year, the Bloomberg commodity price index tracking 22 bulk commodities rose 7.1 percent, which was higher than the growths of the U.S. stock market, the dollar index, the 10-year U.S. government bonds and the high-yield bonds. This year the Thomson Reuters Core CRB index tracking 19 major bulk commodities once picked up by 6% and reached a 2-year high on June 23. After experiencing several consecutive years of decline, this year the international bulk commodity prices have taken a dramatic turn at last, topping the asset classes in growth over the same period.

  Although in recent weeks the products of grains and oils have shown a weak trend, the base metals have presented a strong performance with the LME zinc futures price hitting a three-year high and the LME aluminum futures price recording a high since March last year recently.

  Nic Brown, head of commodity section of Natixis, a research institution in bulk commodities, said recently that some speculative funds have been transferred from the stock market to the metals market. Aakash Doshi, vice global president of the bulk commodity section of Citibank, said, "It seems that more and more asset managers have increased the proportion of the bulk commodities in their investment portfolio strategy." Earlier findings of Barclays Bank also show that 54% of surveyed investors plan to increase bulk commodity positions in the next 12 months, with the ratio doubling that at the same period last year.

  Some market participants said that the bulk commodities have shown different trends from other asset classes, the correlation between prices of raw material products and the stock market has been reduced, and some investors have taken the bulk commodity market as an investment channel for risk diversification.

  Kou Ning, an analyst at First Futures Research, said that this year the global economy has picked up gradually with the developed economies represented by the United States showing significant recovery, the market expecting the commodity demand to increase and the profit-driven funds flowing into the commodity market subsequently.

  Since the second quarter of this year, China's policy of “stabilizing growth” has gradually put the economy on a firm basis. Zhao Xianwei, chief macroeconomic analyst at Galaxy Futures, said that in the long term, the emerging economies as the main demanders for bulk commodities in the world have poorer economic conditions than before as it was in the past that China saw large-scale investment in fixed assets and it is difficult to find demanders in emerging markets with economic scale and growth equal to China, and significant uncertainties can still be found in the future trend of the bulk commodities in the world.

  

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