InvestorsHub Logo
icon url

goforthebet

06/14/09 10:03 AM

#50164 RE: jim6103 #50157

Niobium will be amongst them imo

Hedge funds and other large investors are leading a surge of commodities investment that may continue to grow as optimism increases that the worst global recession since World War II is easing, Barclays Plc said.

“People are investing in commodities again because the prices are going up and because the fundamentals look a lot better,” London-based Kevin Norrish, director of commodity research at Barclays, said in an interview in Perth. “We’ve seen a lot of money come in. Hedge funds certainly have come back into commodities over the last few months in a big way. It hasn’t reached its peak.”

The Reuters/Jefferies CRB Index of 19 raw materials surged 14 percent in May, the most since July 1974. More than $6 billion has poured into commodity-industry funds so far this year, swelling assets under management by more than 21 percent, according to Cambridge, Massachusetts-based researcher EPFR Global, which tracks global fund flows.

“There are a number of big investors who are very positive toward commodities now because they realize the supply-side constraints are really important,” Norrish said. “If you have commodities in your portfolio, it does give you diversification that other assets don’t.”

Most large investors aspire to have 5 percent of their portfolios directly invested in commodities, Norrish said.

“If you look at the global portfolioable assets, then commodities as a proportion of that would be a fraction of 1 percent, so there’s lots of potential room for growth,” he said.

Second-Half Concerns

The London Metal Exchange index of six metals has jumped 48 percent this year after falling 49 percent in 2008.

Still, the surge in base and precious metals may peter out in the second half, Norrish said. China’s iron ore restocking trend may reverse and nickel prices will struggle to maintain a price above $14,000 a metric ton, “because that’s the level at which nickel pig-iron production in China becomes profitable,” Norrish said.

Nickel for three-month delivery on the London Metal Exchange hasn’t closed below $14,000 a ton since May 29 and last traded at $15,800 a ton at 11:30 a.m. Singapore time.

Demand for aluminum will fall as supply-side challenges dwindle, he said.

“There’s probably a bit of sideways trading and perhaps some downward momentum to come,” he said. “We don’t think China is going to be able to be the galvanizing force that it has been in the early part of this year. It’s not going to be able to extend that throughout the second half of the year.”

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net

Last Updated: June 12, 2009 00:44 EDT