ETP Q1 2014 Report_07 04 2014_ final

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Press Release
!
Commodity ETPs Back in Favour as Sentiment Turns
London, 09 April 2014: Commodities moved back into favour in 1Q 2014, with commodity
prices as measured by the DJ-UBS Commodity Index rising by 7% and commodity ETPs
seeing their first quarterly inflows after four consecutive quarters of outflows. Total assets
invested in commodity ETPs increased to $122.4bn at the end of Q1 2014 from $122.1bn at
the end of last year, with precious metals, agriculture and industrial metals seeing the bulk of
the inflows. Silver saw the largest inflows during quarter as investors looked to the metal as
a leveraged play on improved sentiment towards gold.
Nicholas Brooks, Head of research and investment strategy at ETF Securities said:
“After seeing selling in January, gold ETPs moved strongly back into favour in February and
March as investors revised down their highly bullish US growth assumptions and revised up
the global risk outlook. Broad commodity ETPs also saw a turn in sentiment, with asset
allocators rotating into the asset class as an alternative to overstretched developed market
equities.
Platinum ETPs saw strong demand as an extended strike in South Africa raised supply
concerns. Coffee and natural gas ETPs, on the other hand, saw aggressive profit-taking as
prices of both commodities surged on weather-related supply issues. Oil ETPs also saw
strong investor profit taking as the WTI oil price rallied on strong US demand for oil products
early in the year.”
Key commodity ETP trends in 1Q 2014:
•
Commodity ETPs see first quarterly inflows in a year. Commodity ETPs received
$271mn of net new inflows in 1Q 2014, marking the first increase since Q4 2012.
Inflows together with a 7% rise in commodity prices as measured by the DJ-UBS
Index helped push commodity ETP AUM to $122.4bn from 122.1bn at the end of Q4
2013.
•
Silver ETPs see largest inflows, with $354mn of net purchases. Silver was one
of the few commodity ETPs to see inflows in every month of the first quarter,
following on strong inflows in 2013. It appears that investors view the silver price
around the $20/oz level as a good entry point (less than half its 2011 peak) and with
silver often viewed as a high beta version of gold, improved sentiment towards the
gold price is causing investors to build positions in silver ETPs.
•
Gold ETPs see strong investor demand in February and March as global risk
perceptions rise. Gold ETPs saw the strongest inflows of any other commodity ETP
in February and March, with inflows of $322mn and $536mn respectively. Large
outflows in January ($946mn), however, meant that for the full quarter there were in
fact $88mn of outflows. The strong positive turn in investor sentiment towards gold in
February and March was driven by a number of factors. The first was a scaling back
of investor bullishness on the growth outlook for the US economy following weak
data releases. The second was an upward revision to global economic and political
risk assessments following financial and political turmoil in a number of emerging
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markets. Finally, Russia’s take-over of the Crimea and continued concerns of a
broader conflict in the Ukraine has caused investors to turn to gold as insurance
against further negative political and economic surprises.
•
Platinum ETPs see strong demand as investors worry about South Africa
supplies. An extended strike in South Africa, where over 70% of the world’s
platinum supply is sourced, raised concerns of platinum shortages this year, pushing
up the price and causing investors to increase allocations to the metal. With few
signs of the strike being resolved any time soon, further price gains and inflows seem
likely.
•
Broad commodity ETPs see strong inflows as asset allocators increase
commodity allocations. Broad diversified commodity ETPs saw the strongest
inflows after silver and gold ETPs in February and March, with net new flows of
$324mn and $186mn respectively.
These strong inflows were masked in the
quarterly figures due to $683mn of outflows in January, with quarterly flows down
$173mn. The strong rebound in investor interest in ETPs providing broad commodity
exposure indicates a sentiment shift towards the asset class by global asset
allocators. With most commodity prices at the end of 2013 well down on peak levels
three years ago and developed market equity valuations starting to appear stretched,
a number of investors appear to have been rotating into commodities over the past
two months. With China having recently announced a new fiscal stimulus program
and further easing likely on the way, the sentiment shift towards commodities has the
potential to gather further momentum as long as the US economic recovery remains
on track.
•
Agriculture sees strong investor interest as prices rebound. Agriculture ETPs
saw a rebound in investor interest in 1Q 2014, with the sector seeing $217mn of
inflows. The largest inflows ($182mn) were into broad diversified agriculture ETPs
indicating that the bulk of buying was by asset allocators wishing to gain broad
exposure to the sector rather than tactical single commodity bets. Of the individual
agriculture commodities, corn saw the strongest investor interest, with $109mn of
inflows during the quarter.
•
Coffee ETPs see outflows as investors take profits as Arabica price surges.
Following record inflows into coffee ETPs in 2013 as the Arabica coffee price fell
close to a seven year low, investors sold $264mn of their long coffee ETP holdings in
February and March as the Arabica price surged 70%. Short coffee ETPs have
recently started to see increased investor interest.
•
Natural gas ETPs see profit-taking as Henry Hub price rallies strongly on US
cold weather. Natural gas ETPs tend to see range-trading behaviour and 1Q 2014
was no exception. After seeing inflows through much of 2H 2013 when the Henry
Hub spot price was loitering around $3.5/MnBtu, as the price spiked up to a peak of
$7.98/MnBtu in March 2014, investors took profits heavily, with $218mn leaving
natural gas ETPs in March alone. As with coffee, there has been increased interest in
short natural gas ETPs recently. Oil ETPs saw large outflows in January 2014 as the
WTI oil price surged on US cold weather and inventory drawdowns and investors
!
took profits. However, as prices stabilised in February and March, investors moved to
the sidelines and oil ETP flows levelled out.
Global Commodity ETP Assets and Flows to March 2014
(data to March 31, 2014)
Flows ($m)1
Sector
Diversified Broad
Diversified
Diversified - Ex Agriculture & Livestock
Diversified - Ex Energy
Diversified - Light Energy
Agriculture
Diversified
Cocoa
Coffee
Corn
Cotton
Grains
Rice
Softs
Soybeans
Soybeans Meal
Soybeans Oil
Sugar
Wheat
Energy
Diversified
Biofuels
Carbon
Coal
Crude Oil
Electricity
Gasoline
Heating Oil
Natural Gas
Petroleum
Industrial Metals
Diversified
Aluminium
Copper
Lead
Nickel
Tin
Uranium
Zinc
Livestock
Diversified
Lean Hogs
Live Cattle
Precious Metals
Diversified
Gold
Palladium
Platinum
Rhodium
Silver
Total
Jan-14
Feb-14
Mar-14
Q1-14
Q4-13
Q1-14
Q4-13
-683
-670
13
-24
-2
35
-74
-1
22
1
-7
-2
0
-2
0
0
-1
91
8
-292
-29
0
-1
0
-224
0
-3
3
-38
0
143
34
4
85
-2
24
9
0
-10
0
-1
1
0
-1,034
-114
-946
-4
-27
5
51
-1,831
324
218
89
18
0
64
38
4
-110
82
8
17
0
-1
0
0
1
9
15
262
-2
0
1
0
39
0
-2
0
226
0
-40
30
0
-77
2
5
0
0
1
2
2
1
0
529
-12
322
-36
34
0
221
1,141
186
147
19
20
0
118
218
5
-154
26
5
1
0
24
-1
0
0
-1
-7
-181
63
0
0
0
-22
0
-3
-1
-218
0
59
14
8
36
-2
3
0
0
0
7
7
-2
3
773
20
536
18
112
5
82
961
-173
-305
121
14
-2
217
182
8
-242
109
6
16
0
21
-1
0
0
99
16
-211
32
0
0
0
-207
0
-8
2
-30
0
162
78
12
44
-2
32
9
0
-9
9
8
0
3
268
-106
-88
-22
119
10
354
271
-673
-672
-2
-1
1
-279
-269
-7
31
1
-9
-26
0
0
-2
0
-6
8
0
-994
3
0
0
0
-640
0
0
0
-358
1
-163
-41
-52
-64
1
0
3
0
-11
-6
-5
0
-1
-5,651
55
-5,730
-23
259
6
-219
-7,766
16,160
15,503
316
311
29
4,059
2,919
77
172
208
63
172
0
54
0
5
33
211
146
5,992
622
0
3
0
3,367
0
62
15
1,915
7
1,460
759
69
463
7
106
21
0
36
106
87
11
9
94,650
904
75,889
1,504
3,832
125
12,395
122,427
16,069
15,575
186
279
29
3,699
2,815
68
234
82
51
168
0
25
32
0
4
87
133
6,834
614
1
3
0
4,076
1
70
13
2,048
8
1,464
748
60
513
7
59
12
6
57
92
76
10
6
93,993
907
75,860
1,419
3,576
90
12,141
122,152
Source: ETF Securities, Bloomberg
1
Excludes price changes over period.
END
!!
About ETF Securities
AUM ($m)
!
!ETF Securities is one of the world’s leading providers of exchange-traded investment
products and a pioneer in exchange-traded commodities. We are dedicated to developing
liquid, transparent investment solutions that can be traded on world stock exchanges. The
company has a strong history of product innovation and this remains a key tenet of our
guiding philosophy. Our management team listed the world’s first gold exchange-traded
commodity in 2003, and many other market-leading investment solutions have since
followed. Today ETF Securities offers what we believe to be the world’s most comprehensive
range of exchange-traded commodities and is responsible for approximately US$19 billion in
global investor assets.*
!*As at 31 March 2014
!For further information, please contact the press office on:
Tel: +44 (0) 20 7448 4330
Email: [email protected]
!To learn more about ETF Securities go to: www.etfsecurities.com
!
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