Global Commodities Market Heading For Extended Boom Period

Bernama - 13 March 2008

Kuala Lumpur - The global commodities market is heading for an extended boom period as growing pressure for new sources of supply amid rising demand will further push prices to peak levels, according to an analyst.

Schroder Investment Management Ltd's emerging market debt manager Christopher Wyke said among the strongest performers were gold and palm oil as these commodities will have the potential for considerable price increases amid a boom market.

"We are in the early stages of an extended bull market on commodities. Depleting resources and environmental controls will further depress supply and push up prices," said Wyke, who is based in London.

At a media briefing organised by HwangDBS Investment Management Bhd here today, he said the commodities market will be influenced mainly by fundamentals of demand and supply even though there may be some speculations.

According to Wyke, the weakening US dollar will add to pressure for more price increases.

"This is because as the US currency falls, commodity prices which are mainly quoted in US dollar, will be attractive for Asian nations which are seeing their currencies strengthening against the greenback," he said.

HwangDBS Investment Management's chief investment officer David Ng said the ringgit is expected to see further appreciation, especially with the strengthening of Asian currencies.

At the briefing, Ng highlighted the company's Global Commodity Fund which was launched in September last year, saying that about RM130 million of the fund had been taken up.

The fund seeks to generate capital gains the long term through exposure to commodity related instruments globally, he added.

Ng said though relatively new in Malaysia, commodity funds are expected to grow in demand among investors, especially with the commodities market remaining relatively buoyant.

A strong currency will also help to boost prices, he said.