NEW YORK, Jan. 12, 2017 /PRNewswire/ -- Commodities
gained in December due to improving supply/demand fundamentals for
crude oil and higher economic growth expectations, according to
Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was
positive for the month, with 10 out of 22 Index constituents
posting gains.
Credit Suisse Asset Management observed the following:
- Livestock increased the most, up 10.00%, led by Lean Hogs after
the USDA reported higher US pork sales in December compared to the
same period last year.
- Energy gained 9.04%, due to increased confidence that OPEC
members will deliver on previously announced production cuts,
potentially moving the supply/demand balance into deficit sooner
than previously expected.
- Precious Metals declined 2.17% due to the strengthening of the
US Dollar and higher US Treasury yields, dampening investor demand
for Gold and Silver.
- Agriculture decreased 2.26%, led lower by Coffee. CONAB,
Brazil's national supply agency,
increased its production outlook as ideal growing conditions
continued in the country's key coffee producing regions.
- Industrial Metals declined the most, down 5.04%, amid
predictions of reduced base metal demand out of China after its president announced his
willingness to accept less than the 6.5% targeted economic growth
rate in an attempt to keep the economy from overheating.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "The year
ended strongly for commodities, with fundamentals improving for key
commodities as cyclical over-supply resulting from the previous
period of higher prices has further eroded. This was especially
true for oil after OPEC and non-OPEC members agreed to reduce
production, allowing prices to end 2016 in positive territory,
something not seen since 2013. During 2017, markets will be focused
on whether these countries will comply with the output quotas as
well as on monitoring the potential supply response from US shale
players as prices increase. However, the price outlook has improved
as the global oil supply/demand balance looks set to move into
deficit in 2017 and as OPEC reasserts itself as a major player in
the oil markets."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added: "In 2016, multiple foreign central banks increased
stimulus measures to support their respective economies. On the
other hand, the US Federal Reserve raised short-term interest rates
in December and indicated the path for rate hikes in 2017 has
accelerated. This policy divergence will continue to impact US
Dollar volatility and most likely commodity prices, in the short
term. Additional fiscal stimulus measures paired with continued
loose monetary policy may potentially lead to more inflation risk.
Amid this uncertainty, it may be more difficult to predict how
markets will react, highlighting the benefits of holding
commodities as a valuable asset class diversifier."
About the Credit Suisse Total Commodity Return
Strategy
Credit Suisse's Total Commodity Return Strategy is managed by a
team with over 30 years of experience, and seeks to outperform the
return of a commodities index, such as the Bloomberg Commodity
Index Total Return or the S&P GSCI Total Return Index, using
both a quantitative and qualitative commodity research process.
Commodity index total returns are achieved through:
- Spot Return: price return on specified commodity futures
contracts;
- Roll Yield: impact due to migration of futures positions from
near to far contracts; and
- Collateral Yield: return earned on collateral for the
futures.
As of December 30, 2016, the Team
managed approximately USD 9.2 billion
in assets globally.
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Certain risks relating to investing in Commodities and
Commodity-Linked Investments: Exposure to commodity
markets should only form a small part of a diversified portfolio.
Investment in commodity markets may not be suitable for all
investors. Commodity investments will be affected by changes in
overall market movements, commodity volatility, exchange-rate
movements, changes in interest rates, and factors affecting a
particular industry or commodity, such as drought, floods, weather,
livestock disease, embargoes, tariffs and international economic,
political and regulatory developments. Commodity markets are highly
volatile. The risk of loss in commodities and commodity-linked
investments can be substantial. There is generally a high degree of
leverage in commodity investing that can significantly magnify
losses. Gains or losses from speculative derivative positions may
be much greater than the derivative's original cost. An investment
in commodities is not a complete investment program and should
represent only a portion of an investor's portfolio management
strategy.
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SOURCE Credit Suisse AG