How China’s Shopping Spree Helps Commodity ETFs

As the market turmoil starts to dissipate, the commodities market, along with related exchange traded funds (ETFs), may be assisted by China’s desire to hoard basic materials.

The current surge in commodity prices maybe a result of strong purchasing by China, but most of the buying has been to build stockpiles. This kind of buying isn’t seen as sustainable in the long run, reports Keith Bradsher for The New York Times.

Commodities and shipping executives note China’s recent purchases of commodities that include iron, aluminum, copper, nickel, tin, zinc, crude oil, canola and soybeans. China is storing these commodities for several reasons: in anticipation of higher prices in annual contracts, for strategic reasons or to insulate domestic producers from any potential falling global prices.

J.P. Morgan (DBB): up 30.3% year-to-date

• PowerShares DB Oil (DBO): up 34.8% year-to-date

• Market Vectors Coal ETF (KOL): up 71.9% year-to-date

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Comment by Gregory

2009-07-23 04:40:29

interesting point of view

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