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ETF Securities’ resources equity ETF surges 20 per cent

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ETF Securities says it has seen strong returns in its new platform of commodity-related equity ETFs in recent weeks, highlighting a broad pattern of strength across commodities and comm

ETF Securities says it has seen strong returns in its new platform of commodity-related equity ETFs in recent weeks, highlighting a broad pattern of strength across commodities and commodity equities.

Average returns for ETF Securities’ commodity-related ETFs have risen by 32.1 per cent since 20 November 2008. AUM has grown above USD30m since its recent launch.

The ETFS Dow Jones Stoxx 600 Basic Resources Mining Fund – which tracks the performance of the largest European companies engaged in the basic resources sector – rose by 20.1 per cent last week. It has risen a total of 34.3 per cent since 20 November 2008, substantially outperforming most benchmark equity indexes and asset classes.

Despite the current economic downturn, companies sensitive to the economic cycle such as steel companies also gained last week with the ETFS Russell Global Large Cap Steel rising by 13.8 per cent, bringing total returns since 20 November 2008 to 47 per cent.

ETF Securities says steel companies appear to be benefiting from signs of increased demand in China and the general perception that steel stocks were already discounting an extremely severe and prolonged economic downturn.

Shipping has also started to perform, with the ETFS Russell Global Large Cap Shipping Fund surging 10.8 per cent last week bringing total returns over the past two weeks to 13.8 per cent.

The ETFS Russell Global Coal Fund posted the strongest rise amongst energy equity ETFs, up 12.1 per cent over the week. As a key input in steel production, the bounce in Chinese manufacturing activity has also added further impetus to coal’s equities. It has risen 57.9 per cent since 20 November 2008, making it the second best performing equity ETF in ETF Securities’ platform.

Coal equities have outperformed all other energy related equities – the ETFS Dow Jones Stoxx 600 Oil & Gas Fund returned 6.6 per cent and the ETFS DAXGlobal Alternative Energy Fund returned 1.9 per cent last week.

The strongest performing equity ETF over the past few months has been the ETFS Russell Global Gold Mining Fund, up four per cent last week and 95.5 per cent since 28 October 2008. Over the past three months it has outperformed the gold price by 200 per cent.

In terms of broader equity benchmarks, investors appear to be maintaining a relatively conservative stance, favouring highly liquid large cap funds such as the ETFS Russell 1000 Fund versus small cap higher growth funds such as the ETFS Russell 2000 Fund.

Nicholas Brooks, head of research and investment strategy at ETF Securities, says: "The strong rise in resource-related equity ETFs appears to be related to recent data indicating that the extreme pessimism towards global manufacturing and resource demand – particularly from China – may have been overdone, and the substantial discounts of many resource equities to commodity prices."

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