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Broad commodity ETPs attract strong inflows in July -BlackRock
August 8, 2014 / 9:32 AM / 3 years ago

Broad commodity ETPs attract strong inflows in July -BlackRock

* Biggest inflows to diversified category in 3 years
    * Industrial metals attract a robust $117 mln
    * Gold ETPs rebound, with inflows of $630 mln

    By Claire Milhench
    LONDON, Aug 8 (Reuters) - Diversified commodity
exchange-traded products (ETPs) attracted strong inflows in July
as a pick-up in economic growth in China and the United States
encouraged investors to return to the unloved asset class.
    Investors injected $936 million into broad-basket commodity
ETPs last month - the biggest inflow for this segment in three
years, data from asset manager BlackRock showed. 
    That compared with the high watermark for the category in
February 2011 of $1.5 billion in inflows, according to Ursula
Marchioni, head of ETP Research EMEA at BlackRock's iShares.
    Industrial metals ETPs also attracted a robust $117 million
as the tide began to turn for the more cyclical commodities.
    ETPs, whose value is linked to moves in their underlying
assets, offer an easy route into commodities for investors and
allow asset allocators to make quick, tactical changes to their
portfolios. 
    Investors withdrew $42.9 billion from commodities ETPs in
2013, preferring to join the equity rally, but
improving economic data in 2014 has tempted some to return.
    "Sentiment across commodities was deeply negative last year,
but people now feel it has been beaten up way too much," said
Nitesh Shah, associate director at ETF Securities, an issuer of
ETPs. 
    "Prices are looking somewhat attractive now, the U.S.
economy is showing good growth, and investors are looking for
very broad exposure. Sentiment has turned around decisively."
    The S&P GSCI commodity index was down 5.9 percent in July,
but this was mainly due to falls of 5.8 percent in energy and
8.7 percent in agriculture. Industrial metals were up 2.7
percent due to low inventories and strong Chinese demand,
according to S&P Dow Jones Indices. 
    Marchioni also pointed to China's HSBC flash PMI reading for
July, which suggested factory activity was expanding at its
fastest pace in 18 months. 
    "During August some of the cyclical commodities should
continue to benefit from better numbers from both China and the
U.S.," Shah said, noting that U.S. second-quarter GDP had
rebounded from the first quarter, when a prolonged spell of
extremely cold weather paralysed parts of the country.
    
    GOLD ETPS ON THE REBOUND
    Gold ETPs also posted a rebound with some $630 million of
inflows, although they were still down $182 million on the year.
In terms of price performance, gold was down 3.4 percent for the
month. 
    Marchioni said that most of the gold inflows were in
U.S.-listed products and might have been related to expectations
that inflation will rise given the pick-up in economic activity.
    Agriculture ETPs showed outflows of $74 million on prospects
for high yields of wheat, corn and soybeans and weak prices.
"All of those have seen near perfect growing conditions," Shah
said. 
    "After last year's drought, a lot of farmers allocated more
land to these key crops, especially in the U.S., and now supply
is looking extremely flush, so price performance has been
negative."
    S&P Dow Jones Indices said that corn was the worst
performing commodity in the S&P GSCI in July, down 14.7 percent.
    At the end of July, BlackRock's data covered 911 commodity
ETPs worldwide, worth some $125 billion.
    
    Global commodity ETPs at end-July (US$ mln)
 SECTOR                       JULY FLOWS  JULY ASSETS
 Broad/Diversified            936         18,206
 Agriculture                  -74         7,158
 Energy                       18          4,650
 Industrial Metals            117         2,300
 Gold                         630         71,799
 Silver                       -46         11,949
 Precious Metals Total        657         93,025
 TOTAL COMMODITIES            1,654       125,339
    Source: BlackRock

 (editing by Jane Baird)

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