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Commodity prices raised by low stockpiles, says Jim Rogers
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| Yang Huiwen |
Sat, Apr 12, 2008
The Straits Times
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HEDGE funds have been blamed for sending commodity prices skywards but international investor Jim Rogers believes the cause is far simpler - record-low inventories.
Singapore-based Mr Rogers dismissed the argument that prices have been at the mercy of hedge funds making bets on futures markets.
'Prices are going up because inventories are at the lowest they've been in decades. People invest in things that are successful and where fundamental supply and demand is positive,' he said.
| 'Rice is going up not because hedge funds are pumping money into them; rice is going up because there is no rice.
'Whenever you have a bull market, people will put their money there. That's where the attractive investments are.'
Mr Rogers, 65, said a recession in the United States would have little effect on prices.
'Even if demand flattens out, you can have a bull market. Supply is under terrible duress,' he said, pointing out that when commodities have done well, such as in the 1960s and 1970s, stocks have performed badly.
Conversely, when equities prospered in the 1980s and 1990s, commodities were in the doldrums.
He blames the commodity supply crunch on a lack of investment in production technology, the limited availability of arable land, and a shortage in equipment such as tractors and in raw materials, seeds and fertilisers.
He said these factors were driving the commodities bull market, which he estimates will run until 2020.
Mr Rogers said Singapore has the potential to become Asia's commodities trading centre and should start working towards that goal.
'Right now, there is no commodities centre in Asia. It is absurd that everyone has to go to Chicago to buy rice when rice is planted mostly in Asia, and to London to buy tin when tin is produced in Asia,' he said.
'Singapore has a very sound, independent currency, and an independent regulatory authority that is friendly towards foreign investment and investors. Singapore has it all.
'I would certainly like to see commodities trading develop here. I know the Singapore Exchange would. Let's hope it has the manpower and the capability to pull it off.'
yanghw@sph.com.sg
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