denotes premium content | Jan 10 2009 Trade & Forfaiting Review magazine archive
Volume 9 Issue 5
A recent report by Barclays Capital shows 93% of investors plan to move funds into commodities over the next three years. Yet further evidence of the growing shift away from traditional paper investments, such as stocks, shares and bonds, towards commodities as an asset class – a trend that has been quietly building among institutional investors.
Meanwhile, China, in a bid to reduce its dependence on a weakening US dollar, is poised to sink a significant amount of its US dollar reserves into commodities. It is also diversifying these reserves into alternative foreign currencies, such as the euro and yen. There is no doubt that if the US trade and fiscal deficit continues to mount, we’ll see this more and more – and not just in China.
Some countries, such as Russia, are increasing their holdings of precious metals, particularly gold, but also the lesser-known metal, palladium. One of palladium’s many uses is found in high-tech manufacturing. With China and India markets growing at pace, demand for the precious metal is increasing.
A metals producer thinking of monetising its assets, says Brodie Cobb at Presidio Financial Partners, “will find that it doesn’t get much better than this”. Certainly, at first sight and with commodities prices at peak levels, this would seem to be the case. That said, with the upward price trend unlikely to slow in the near term, things could get even better.
In the Barclays Capital survey, 50% of institutional investors said they intended to use structured commodity products to make their commodity investments – up from 20% in 2005. “We have seen and will continue to see an increasing amount of investor activity in commodities,” says Kamal Naqvi, director in commodity sales at Barclays Capital. “We expect this to be a major trend in 2006.” And if key economic fundamentals continue, one would imagine, beyond 2006 too.
Michele Martensen, editor
Features
Securing Cotton
How do you obtain security interest on cotton stock warehoused in Uzbekistan? Igor Sidelnikov* explores methods as well as legal options in the event of a default.
Finding resolutions
Mary Boakye, head of the Africa financial markets group at Denton Wilde Sapte, and Matthew Cox, a solicitor in the firm’s structured trade finance group, discuss the difficulties of advancing credit to borrowers in Sub-Saharan Africa.
Back to the future
Aidan Applegarth, managing director of CompanyWise* scans a critical eye over developments in structured commodity trade finance and examines where the market is headed.
Restructuring structured trade
In some ways, trade-finance instruments look remarkably similar to the 1400s when the first letter of credit was issued. But we shouldn’t be deceived. Bankers, export credit agencies and specialty finance companies are continually pushing the envelope to build, for want of a better word, hybrid structures. Erika Morphy reports.
Shiny new people
Commodity finance in the metals industry is as strong as ever. But metals producers are turning to private equity and other capital sources to bridge gaps in their capital stocks. Amanda Greene reports.
Beyond Turkey
Dismayed by Turkey’s ever-decreasing margins, banks are looking to neighbouring countries for profits. But can the legal framework of countries such as Kazakhstan keep apace? Erika Morphy reports on the region’s new trade-finance destinations.
Kurt Cavano: Reeling in Success
The CEO of TradeCard* wasn’t always an international trade specialist. Serendipity, intuition, a lot of hard work, and one giant leap of faith brought Kurt Cavano to where he is today. Amanda Greene reports.
Metals prices: in for a bashing over the long term?
Favourable economics allow for a short-term positive outlook. Longer term, however, investment fundamentals may kick in to herald a significant correction.
Will the left turn in Latin America affect trade?
Today, four out of the six largest economies in Latin America have left-leaning governments representing about half of the total GDP in 2005, and half of the population, writes Mauricio Paz, vice president of global trade finance at BBVA in New York.
Regulars
Country-risk appetite
Have we finally seen the bottom of the curve for the main emerging markets? Certainly resistance has been seen in Turkey, although the top-tier names in Russia and Kazakhstan still appear to be able to push the boundaries further.
Emerging-market debt pricing
High oil prices mean that the Angolan state budget currently looks much better than it has for a long time...
Deal me in
SiloBank has just received a call from one of its key commodity customers to consider providing finance for sugar purchases in Asia. Relationship manager, Ace Banker is on the case…
60-second interview: Cécile Besse Advani
Trade & Forfaiting Review speaks with Cécile Besse Advani, head of Turkey, Central Asia and Caucasus for export finance Europe at BNP Paribas.
Capturing telcos receivables
A recently signed structured trade finance guarantee facility has finally penetrated the deregulated cross-border telecoms market. Rodney Ballard, head of structured trade finance at Natexis Banques Populaires in London, explains how it was done.
Letter From Hong Kong
Happy Chinese New Year or ‘Kung Hei Fat Choi’, as the Cantonese say in Hong Kong. It is the year of the dog, which may save some of the poor creatures from the frying pan...
Revalidating the supply chain
For much of the past ten years, a key philosophy underlying developments in the trade finance world has been that of ‘dematerialisation’, writes Bruce Proctor, JPMorgan Chase, New York.
