Resources equity ETF surges 20% as investors move into resource-related equities and hard assets

Resources equity ETF surges 20% as investors move into resource-related equities and hard assets…

* Resource equities are the best performing sector last week, year to date, and over 3 months
* Returns of cyclical sectors continue to rebound as Steel, Coal and Shipping ETFs returned an average of 12.2% last week
* Coal equities outperformed other energy companies, returning 8.5% last week
* ETFS Russell Global Gold Mining Fund (AUCO) outperformed the gold price by 200% over the past 3 months
* Investors continue to search for security in the shape of collateralised investments and Exchange Traded Funds (ETFs)

ETF Securities has seen strong returns in its new platform of commodity-related equity ETFs in recent weeks, highlighting a broad pattern of strength across commodities and commodity equities as investors increasingly seek out hard assets and the companies that produce them. Average returns for ETF Securities’ commodity-related ETFs have risen by 32.1% since 20 November 2008. The new ETF platform is a world first for exposure to such a wide range of thematic global commodity sectors in the one ETF platform, and as a result, AUM has grown above $30 million since its recent launch. ETF Securities is the global pioneer in commodities with $9bn invested in commodities directly through Exchange Traded Commodities (ETCs).

The ETFS Dow Jones Stoxx 600 Basic Resources Mining Fund (BRES) – which tracks the performance of the largest European companies engaged in the basic resources sector – posted a remarkable performance last week rising by 20.1%. BRES has risen a total of 34.3% since 20 November 2008, substantially outperforming most benchmark equity indexes and asset classes. Despite commodity prices falling, supply side risks remain as many major capital expenditure plans have been scrapped. Since October 2008, over $106bn of investment cuts or delays have been reported by the oil majors alone.

Despite the current economic downturn, companies sensitive to the economic cycle such as steel companies also gained last week with the ETFS Russell Global Large Cap Steel (STLL) rising by 13.8%, bringing total returns since 20 November 2008 to 47%. Steel companies appear to be benefiting from signs of increased demand in China demand and the general perception that steel stocks were already discounting an extremely severe and prolonged economic downturn. This also applies to the shipping sector; shipping has started to perform as highlighted in ETF Securities’ recent report Shipping Stocks: Time for a Bounce? The ETFS Russell Global Large Cap Shipping Fund (SHIP) surged 10.8% last week bringing total returns over the past two weeks to 13.8%. Historically SHIP has had a strong positive correlation to the Baltic Dry Index however, with the Baltic Dry Index up 144.7% since 8 December 2008 and SHIP up only 11.3%, SHIP equities appears to be trading at a discount.

On a similar theme, the ETFS Russell Global Coal Fund (COAL) posted the strongest rise amongst energy equity ETFs, up 12.1% over the week. As a key input in steel production, the bounce in Chinese manufacturing activity has also added further impetus to COAL equities. COAL has risen 57.9% since 20 November 2008, making it the second best performing equity ETF in ETF Securities’ ETF platform. COAL equities have outperformed all other energy related equities- the ETFS Dow Jones STOXX 600 Oil & Gas Fund (OILG) returned 6.6% and the ETFS DAXGlobal Alternative Energy (ALTE) Fund returned 1.9% last week.

The strongest performing equity ETF over the past few months has been the ETFS Russell Global Gold Mining Fund (AUCO), up 4% last week and 95.5% since 28 October 2008. Over the past three months AUCO has outperformed the gold price by 200%. AUCO continues to benefit from investors increasingly bullish view on the gold price and gold miners ability to leverage on these gains.

Source:ETFWorld.co.uk – ETFSecurities