Commodity markets not yet an attractive investment channel

(CPV) – This was the comment of Finance Professor from ESCP Europe Steve Ohana in a conference, entitled “The Impact of Finance on the Commodity Markets” organised by the French-Vietnamese Centre for Management Education (CFVG) on December 16 th .

Commodity markets are still new in Vietnam, but many Vietnamese investors have already shown an interest in this channel, after the downward trend of the real estate and stock markets.

The current environment is not very favourable to investing in commodities as a whole in the short-term. Industrial metals and soft commodities (grains in particular) offer dull prospects due to the combination of bad growth outlook in Europe and China and the rally of the US dollar against most other currencies, said Mr. Ohana. The current deflationary context could be further aggravated by a worsening of the euro zone crisis but could also be mitigated by new action from the Federal Reserve at the beginning of 2012.

However, investing in oil makes sense as there are signs of supply tension visible in the market and oil could serve as a powerful diversification instrument against the danger of escalating tension in Syria and Iran.

Professor Ohana also shared his experience in investing in commodity markets for investors. He told them to be wary of giant rises which started from small trends or liquidity conditions on the market. As commodities have become sensitive to liquidity conditions, signs of liquidity degradation should be actively monitored as an indicator of downside risk.