Australia’s AMP Capital Investors, which manages close to $100 billion, has jumped on the commodity bandwagon.
It has reversed an underweight commodities allocation to overweight, Bloomberg reports.
The firm expects global economic recovery, led by China, to boost commodities prices. It is particularly bullish on oil and base metals.
But it doesn’t favor all commodities, leaving an underweight tag on precious metals and soft commodities, such as wheat and soybeans.
“We made a significant change,” AMP investment strategist Nader Naeimi told Bloomberg.
“The main reason is that we are seeing a clear recovery in China,” he says. “Global stimulus spending, particularly on Chinese infrastructure, is inherently commodity-intensive.”
Naeimi says that “even though demand for commodities is quite low now, we’re moving to an environment where it will become very strong. This is about economic fundamentals.”
Copper prices already have jumped by more than half in 2009 amid massive buying from China and talk that U.S. demand will increase as well.
Oil prices have soared more than 20 percent this year, reversing the decline of last November-December.
“From here, we will see a clear outperformance of physical assets as an asset class, long-term as well as short-term,” Naeimi says.
Derek van Eck, principal of Van Eck Associates, also sees gains ahead for commodities.
“The general outlook is improving, due to both cyclical and structural factors,” he tells Barron’s.
“The red light, which had been flashing, is now gradually turning green in some markets.
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