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Commodities Briefing 12.Dec 2008

Posted on 12 December 2008 by VRS |  Email |Print

Benedicte Gravrand, Opalesque London: The Earth Element Fund strategy started trading on 8 Dec 2008 with a limited number of early stage investors. The Fund is managed by Four Elements Capital, a dedicated commodity research house, who held the soft launch for the flagship fund in line with schedule.

The Earth Element Fund targets an absolute return of over 20% per annum. The strategy uses both fundamental and quantitative analysis, taking long and short positions on a large set of commodity futures contracts across all major sectors. The Fund invests in commodities only and follows a systematic investment process offering USD and EUR share classes.

The Fund will be open from January with monthly liquidity and has a US$500m capacity. Four Elements Capital Pte Ltd was incorporated in Singapore on the 14 October 2008 (see our previous exclusive here).

Four Elements Capital’s CIO Lionel Semonin told Opalesque in an earlier interview that the firm would provide investment decisions on a diverse set of commodities including Energy, Metal and Agriculture. The managers will not just be looking at arbitrage opportunities but mainly at both fundamental and quantitative factors for directional plays on commodities – i.e. investing long and short at a moment in time in a large set of commodities. The rationale behind the investment in the fund is to provide investors with alternative investment on underlying commodities.

“There has been a big trend in the last few years of getting in the long only commodity space as a diversification through futures; we saw a rising interest in commodities and many new long-only indices,” he said. “Commodities returns provide diversification whether they are long-only or long/short positions from other equity or bond portfolios; our approach is to provide long/short commodity positions in a single strategy approach (i.e. relative value between commodities).”

Four Elements’ edge is its ability to predict future movements of commodities through both quantitative and fundamental single-commodity analysis. Leila Kuhlenthal (Performance Attribution and Investor Relations) added that the fund will invest in exchange-traded futures, limiting the Fund’s counterparty risk.

Semonin stressed that Four Elements is an asset management company that is focused on research, research being half of the firm’s people resources. One researcher focuses on agriculture, the other on metals and energy.

Because the firm invests in a diverse set of commodities and has multiple sources of alpha per commodity, its systematic process is essential to process all the information on a large set of commodities. However, a key differentiating feature for the Fund is that the managers process both fundamental and quantitative data.

Being in Singapore allows the managers to handle the fund from an efficient environment with a strong infrastructure, Semonin said. The time zone allows them to be active before market participants in London and New York start, which gives them an advantage when significant events have happened while the market is closed.

Commodities have become consumption-led and the consumption from Asian countries is also giving Four Elements a differential factor in its fundamental approach. Kuhlenthal added that commodities had become an increasingly important investment for investors in Asia, and being in Singapore allows Four Elements to be accessible to those clients. Also, from the perspective of access to exchanges, the CME “gateway” is in Singapore, and this allows them to trade real-time in the U.S. exchange (the infrastructure being very reliable).

Article Source: http://www.fourelementscapital.com

Posted on 12 December 2008 by VRS |  Email |Print

From Timesonline.co.uk: World oil demand is set to fall this year for the first time in 25 years as a broadening economic recession undermines energy consumption.

New figures from the International Energy Agency (IEA) yesterday showed that global demand for oil will fall to an average of 85.8 million barrels per day this year - 200,000 barrels lower than in 2007 and representing the first year-on-year decline since 1983. …. Full Article: Source

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From Reuters: Jim Rogers, the famous investor and author on commodities, said on Thursday the credit crisis has not killed the bull market in commodities as many imagined, but just dealt it a “horrible setback”.

“In 1987, we had a horrible decline in the stock market. Do you think that was the end of that bull market?” Rogers asked a panel of journalists at the Reuters Investment Outlook 2009 Summit in New York….. Full Article: Source

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From Financialexpress.com: World oil demand growth will return in 2009 after shrinking this year for the first time since 1983 due to the global economic slowdown, the International Energy Agency (IEA) said on Thursday.

The IEA’s view is in stark contrast to the US Energy Information Administration, which on Tuesday said demand is expected to shrink by 450,000 barrels per day in 2009 following a predicted 50,000 bpd decline in 2008. In its monthly report, the Paris-basd IEA cut its 2008 oil demand estimate by 350,000 bpd to 85.8 million bpd — a 200,000 bpd year-on-year fall. …. Full Article: Source

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From Fnarena.com: Barclays Capital held its fourth annual Commodity Conference in the US last week and as part of the proceedings participants were surveyed to ascertain their views on the outlook for commodity markets.

The key finding, Barclays reports, was the level of commitment of institutional investors to commodities as an asset class remains very high. One key strength of the asset class according to those responding was the value of diversification the sector offers….. Full Article: Source

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From FT: Spread-betting companies are seeing significant growth in commodity trading volumes, despite prices in the sector starting to stall. City Index says that trading figures for commodities are up materially on last year and that, during the past three months, it has seen some of the busiest-ever trading days.

IG Index also says it has experienced record days recently – with trading up as much as fivefold compared with normal….. Full Article: Source

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From Reuters: China is not manipulating its currency to gain a trade advantage, but Beijing should let the yuan appreciate to its proper level, the Treasury Department said in a semi-annual report to Congress.

“China needs to move more quickly toward a market-determined exchange rate and allow greater appreciation of the (yuan) against the dollar in the near term,” the report states….. Full Article: Source

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From Bloomberg: China faces deflation next year as food and commodities prices have plunged, which will prompt the central bank to cut interest rates further, according to Goldman Sachs Group Inc. and JPMorgan Chase & Co.

The PPI grew at a slower rate than CPI in November for first time since April, according to data compiled by Bloomberg News….. Full Article: Source

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From Snl.com: Global steam coal prices, which have tumbled sharply during the past six weeks, could recede further in 2009 if the gloomy economic picture stays in place, according to a new research report from Fortis SA/NV, the Brussels, Belgium-based financial services company.

“There is plentiful evidence that global economic weakness has dented demand for coal,” according to the December 2008 Fortis Energy Monthly. …. Full Article: Source

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From Chinadaily.com.cn: A glimmer of light has shined through the gloom hanging over the Shanghai commodity futures market.

Futures contract prices of several key industrial commodities rebounded smartly on expectations that strong signals from the just-concluded annual Central Economic Work Conference can lead to new economic stimulus measures that will create greater demand for basic metals and other industrial materials….. Full Article: Source

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From Guardian: Australia will unveil on Monday its vision for the most sweeping carbon trading scheme outside the European Union, targeting a sizeable cut in emissions that critics say could wallop an economy already on the ropes.

The government’s blueprint for a national cap-and-trade system will probably set a goal of cutting 2020 emissions by between 5 and 15 percent from 2000 levels, a major undertaking for one of the world’s most carbon-intensive nations….. Full Article: Source

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From Commodities-now.com: It’s the end of another year, an appropriate time for a forward look at energy and environmental issues. Many ideas are buzzing around Washington D.C. policy circles now. What policies will be implemented, when will they be implemented and how will they be implemented? These are important questions.

The billions of Federal dollars targeted for a “jobs program” appears to be another boondoggle, although notably well-intentioned. A “green jobs training program,” created for people to work in the private sector in energy service companies, makes more sense. …. Full Article: Source

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From Triple Point Technology, the leading global provider of multi-market commodity and enterprise risk management software solutions, announced today the release of Commodity XL for Credit Risk 5.0.

Version 5.0 marks the first major release of Triple Point’s premier credit risk management software since it acquired ROME Corporation, the leading provider of enterprise credit risk solutions, in July 2008. Commodity XL for Credit Risk, formerly ROME CreditRisk, is used by the most recognized companies in the energy and commodity marketplace. It offers a complete end-to-end solution integrating exposure management, collateral management, counterparty management, credit analytics, credit scoring and reporting into a single transparent framework….. Full Press Release: Source

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From Bloomberg: Crude oil fell in New York on speculation that declining fuel demand because of the global economic recession will outweigh cutbacks in output by OPEC.

Crude pared yesterday’s 10 percent gain, which came after Saudi Arabian Oil Minister Ali Al-Naimi said the kingdom had delivered the reductions promised to the producer group….. Full Article: Source

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From Theglobeandmail.com: The U.S. dollar tumbled yesterday between 1 and 4.7 per cent against the world’s major currencies and that could be good for U.S.-dollar-denominated commodity prices.

The main beneficiary of the swing during the past few days has been gold, which is once again trading above $800 (U.S.) an ounce. Oil prices have also shown some signs of strength….. Full Article: Source

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From Guardian: The euro hit a one-month high against the dollar on Thursday and the yen dipped against higher-yielding currencies amid some recent signs of resilience and stability in financial markets.

“The rally we are seeing in the euro is related to a number of reasons — relatively calm markets, collapsing volatility and investors keen to exit some of their short positions ahead of the Christmas holidays,” said Sharada Selvanathan, currency strategist at BNP Paribas in Hong Kong….. Full Article: Source

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From Guardian: Global growth is set to reach its lowest rate since the second world war next year, according to a report out today, with the US and eurozone economies both expected to contract by 1%.

The Barclays Wealth Signpost report said that the first half of 2009 is going to be “a long, hard slog”. Recovery will start in the second half of the year but will vary geographically….. Full Article: Source

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From Washingtonpost.com: Sharply lower consumer spending in the United States and other high-income countries is stalling global trade, causing a surprise downturn in exports from China that is dramatically slowing its economy and rippling through other countries that rely on international commerce.

With recessions hitting the United States, Europe and Japan at the same time, China yesterday said its November exports took their biggest dive in seven years….. Full Article: Source

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From Commodityonline.com: European Union leaders will meet in Brussels on Thursday and Friday to thrash out the next step of their plan to make the world greener.

But, they will be faced with challenging tasks like how to tackle the exploitation of their present carbon trading programme, which apparently helped several companies make a fast buck but failed to do much for the environment….. Full Article: Source

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From Easier.com: Investors are making the most of market volatility by trading ETFs, according to Barclays Stockbrokers. Trading activity in ETFs through Barclays Stockbrokers has increased significantly over the past three months, with October 2008 experiencing the highest volume of trades for the year to date.

September volumes increased 91.5 per cent on August, followed by October up a further 92 per cent on September volumes; in total Barclays Stockbrokers has seen August to October volumes increase by 268 per cent….. Full Article: Source

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From Rednet.cn: Over the next 20 years or so, oil and natural gas will lose top ranking as the world’s most affordable energy sources, according to a survey of energy executives.

Deeper wells in more inhospitable places, both political and geological, have altered presumptions of doing business in the oil patch….. Full Article: Source

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From Telegraph: Sterling may be heading for parity with the euro as our economy grinds to a halt, but Martin Vander Weyer explains why this is the worst time to give up our currency .

Just how far has the pound fallen? You now need more than 88 pence to buy one euro, which is 30 pence more than you needed back in October 2000, when the great European monetary project was widely scoffed at as having produced, in one trader’s elegant phrase, a “toilet currency”. …. Full Article: Source

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From Commodities-now.com: The Regional Financial Centre of Almaty City (RFCA) and OJSC “Russian Trading System” Stock Exchange have set up a commodity exchange, JSC “Eurasian Trading System” headquartered in Almaty, Kazakhstan.

The new commodity exchange is 60% owned by RTS and 40% by RFCA with the total authorized capital of $533,000….. Full Article: Source

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From Bloomberg: Gold traded little changed above $800 in Asia, headed for the biggest weekly gain in nearly three months, as the dollar declined, boosting the appeal of the precious metal as an alternative investment.

Bullion has gained 8.6 percent this week, the most since Sept. 19, as the dollar has fallen 3.9 percent against a weighted basket of six major currencies on speculation U.S. lawmakers will delay voting on legislation to lend the country’s automakers enough money to survive into the new year….. Full Article: Source

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From Globalresearch.ca: Whether you believe in man-made global warming or not, please realize that carbon trading is a scam.

A big red flag is that our bailout buddies over at Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup and the other Wall Street pirates are buying heavily into carbon trading….. Full Article: Source

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From Indiatimes.com: Russia is ready to join forces with OPEC to stem the plunge in crude prices and could even become part of the oil cartel if membership
were in Moscow’s interests, President Dmitry Medvedev said on Thursday.

Medvedev’s comments were a clear signal Russia is prepared to agree to OPEC demands for coordinated output cuts to bolster crude prices and also examine its long term political strategy in the oil market….. Full Article: Source

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From Marketwatch.com: Crude-oil futures soared above $49 a barrel Thursday, propelled by sharp weakness in the dollar and expectations that the Organization of Petroleum Exporting Countries will deliver a significant production cut next week.

Crude for January delivery rose $4.46, or 10.2%, to end at $47.98 a barrel on the New York Mercantile Exchange. Earlier, the contract hit an intraday high of $49.12 a barrel in electronic trading on Globex. …. Full Article: Source

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From Mineweb.com: Noting that physical gold has outperformed “virtually every other asset class on a relative basis,” BMO Capital Markets Bart Melek advises the trend will “likely stretch well into 2009.”

Nonetheless, BMO Global Commodity Strategist Melek counseled that the relatively strong U.S. dollar and the prospect of global disinflation “have made BMO Research somewhat less optimistic about the prospects of the metal in the first half of 2009.”…. Full Article: Source

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From Tvnz.co.nz: We had another stark reminder this week of just how quickly the great commodities boom is coming off with mining giant Rio Tinto announcing it is to slash 14,000 jobs worldwide and will sell billions in assets in a bid to cut back on debt.

It’s an extraordinary turn around for this massive company which only recently was flying high and the subject of a takeover bid from rival BHP Billiton….. Full Article: Source

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From Chicagotribune.com: Wall Street climbed back on an upward track Wednesday, rising as a surge in gold and other commodities prices prompted investors to snap up energy and materials stocks.

Gold picked up $34.70 an ounce, to close at $807.10, lifted by a weaker dollar and because investors seemed to be more willing to take on some risk, a trend that has also been apparent in the recent rally on Wall Street. Oil prices also rose, settling up $1.45, at $43.52 a barrel….. Full Article: Source

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From Mineweb.com: Gold extended gains to rise nearly 3 percent on Thursday as the dollar lost ground against the euro, boosting the precious metal’s appeal as a currency hedge.

Gold and platinum prices traded at within $5 of one another, threatening to breach parity for the first time in 12 years, as platinum remained rangebound ahead of a decision on a $14 billion plan to bail out U.S. carmakers….. Full Article: Source

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