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Commodity-related ETFs outperform as China demand kindles support


Commodity-related equity exchange traded funds continued to outperform broad market benchmarks during the week ending 6 March, with precious and base metal miners and agribusiness equit

Commodity-related equity exchange traded funds continued to outperform broad market benchmarks during the week ending 6 March, with precious and base metal miners and agribusiness equities some of the strongest performers, according to ETF Securities.

Basic resource equities, led by ETFS Dow Jones Stoxx 600 Basic Resources Fund and ETFS Steel Large Cap Fund, outperformed other equity ETFs by up to eight per cent during the week.

Three consecutive rises in China’s manufacturing Purchasing Managers’ Index and rising imports for some commodities has kindled optimism that the country’s stimulus plans could provide some support to raw materials prices, says ETF Securities.

The Basic Resources Fund is the third highest performing ETF over the past three months, up five per cent.

The ETFS Russell Global Gold Fund of gold miners retook the mantle of top ETF this week, with the top one-month, year-to-date and three-month returns of ETFS equity ETFs. With a return of 40 per cent over the past three months, the Russell Global Gold Fund has outperformed the MSCI World equity index by 56 per cent since 5 December.

ETF Securities says gold demand is likely to remain strong this year with high political, economic and financial uncertainty driving demand for safe haven assets and defensive themes.

The ETFS S-Net ITG Global Agri Business Fund remains one of the top ETF performers, with the second highest return over the past month, year-to-date and three months.

Like gold, agriculture’s low correlation to the business cycle has held it in good stead, with returns of nine per cent over the past three months despite the extremely sharp falls in most global equity benchmarks. Strong long term supply-demand fundamentals appear to be underpinning its solid return performance.

The ETFS Dow Jones Stoxx 600 Oil and Gas Fund continues to trade at a deep discount to underlying oil prices, with the oil:oil equities price ratio 37 per cent below its long run average.

Lower US oil inventories and expectations of further OPEC production cut-backs on 15 March have helped drive spot oil prices backs to the USD50 per barrel mark recently, up 21 per cent over the past three weeks.

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