Assets in exchange-traded funds backed by commodities may almost triple in Asia over the next five to seven years, according to S&P Indices.
Assets may grow to about $10 billion in the Asia-Pacific region from about $3.5 billion, Reid Steadman, global head of ETF licensing, said. Assets in exchange-traded products linked to commodities rose to a record $178.2 billion last quarter as funds flowing into gold outweighed reductions in energy and agriculture, ETF Securities LLC said in a report on October 28. Commodities measured by the S&P GSCI Spot Index jumped 26 per cent in the past two years, while the MSCI All-Country World Index dipped 1.5 per cent.
“ETF physically backed by commodities should grow in Asia, with a lot of interest already in gold and silver,” said Natalie Robertson, an analyst with Australia & New Zealand Banking Group Ltd in Melbourne. “The outlook for precious metal prices is positive, in part, due to the likely large inflows of investment expected in this sector.”
Commodities account for 3.6 per cent of ETF assets in Asia, compared with 19 per cent in Europe and 10.4 per cent in the US, he said, citing Deutsche Bank data. ETFs enable buyers to invest in commodities without taking physical delivery.
‘ROOM FOR GROWTH’
“Commodity ETFs are set for growth in Asia, as they have grown in other regions,” said Steadman, who is based in Hong Kong. “Asian ETF markets are generally five to 10 years behind the US and Europe. There’s definitely room for growth.”
Gold held in ETPs reached a record 2,330 metric tonnes on August 18 worldwide, as investors sought a haven amid Europe’s debt crisis and falling currencies. Holdings rose 0.4 per cent to 2,324 tonnes, as of November 16, show Bloomberg data compiled from 10 providers.
Bullion for immediate delivery has risen 21 per cent this year in an 11th year of bull market, reaching an all-time high of $1,921.15 an ounce on September 6, and Brent oil on the London- based ICE Futures Europe exchange gained 15 per cent.
“Asian investors are more skilled than any other investors elsewhere reaching outside the region to invest in products listed elsewhere,” said Steadman. “There is room to grow in terms of locally listed products.”
Asset managers in China, the world’s biggest gold producer, are seeking additional funds to invest in gold and precious metals, as rising inflation spurs interest in alternative assets. Lion Fund Management Co. was the first to place money in foreign gold ETFs, raising more than 3.2 billion yuan ($500 million).
