Market Outlook Updates &
Commodities Sector Allocation:
Base/Precious Metals, Energy, Agri
Robert P. Balan, Senior Market Strategist
Alessandro Gelli, Energy Strategist
Marion Megel, Base/Precious Metals Analyst
Created: October 28, 2011 v.2.s
Summary - Global Macro/Eurozone
The EU summit, after some delay, delivered an agreement that was
very close to overall expectations coming from media reports over the
past week or so. Many details remain to be clarified but the
fundamentals of the deal are:
A voluntary haircut of 50% on Greek debt aiming for a debt/GDP
ratio of 120% by the end of the decade, and further injection by
the EU and IMF into the Greek economy of EUR130bn
A compulsory increase of EUR106bn of euro area bank capital
and an unified approach to guarantee bank bonds to support senior
unsecured term funding markets
An agreement to use the EFSF to insure an (undisclosed) portion
of the new issuance of EGBs and the setting up of an SPV which
attracts external funding. The measures are expected to boost the
effective size of the EFSF remainder by 4 to 5 times
The positive initial response by markets is unsurprising given the huge
amount of market uncertainty that prevailed ahead of the summit. The
upmove is likely to go further in the short run, but from a position-
taking point of view, it is probably best treated as a relief rally which
may last for a few weeks or months, rather than a start of a prolonged
outperformance of European equities and some cyclical currencies
Nonetheless, an immediate binary market risk has been dodged, and in
the meantime, the markets should focus again on global fundamentals,
which have improved significantly from dire status two months ago
One theme is now consistent across all the global markets: the
economic data have been recently surpassing consensus expectations.
Bloomberg data surprise indices reveal that the G7 upside surprises
are at the highest in 10 years, and that bodes well for riskier assets
Even the eurozone shows modest surprises as Sept. money/credit data
show modest expansion: M2 grew by 0.1%, M3 by 0.5% (m/m)
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Summary - Global Macro/China
China’s Premier Wen's commented this week that China would "fine-
tune macro policy at a suitable time and by an appropriate degree"
and "maintain reasonable growth in money and credit". The Ministry
of Industry also said it is studying “stimulative policies” for smaller
companies as a global slowdown threatens growth. These are clear,
unambiguous signals that a policy adjustment/easing is on the way.
We also believe that China will take a proactive fiscal expansion or
monetary easing policy if the economy (including the housing market)
slides further, or if growth in developed countries slow much further
We do NOT expect a hard landing for China — we maintain our base
case soft landing view — with growth growing slightly to 9.2% in Q4,
and 9.7 in Q1 2012. We also forecast CPI inflation to fall below 5.5%
in November and may even go as low as 5.0% in December. This is in
line with developments in the sharply slower M2 growth and recent
large decline in PPI and Corporate Goods Index
A policy change is unlikely before the CEWC meets in Dec. But
selective easing is underway in China — but an RRR cut for smaller
banks (which have more exposure to SMEs) is possible by year-end.
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Summary - Macro and Tactical Allocation
OUTLOOK ON THE U.S. ECONOMY:
GDP rose 2.5% in Q3, according to the advance estimate, in line with
the consensus. The bulk of the rebound relative to the 1.3% growth
recorded in Q2 was centered in personal consumption, which was up
2.4% (consensus: 1.9%). In turn this reflected a 4.1% jump in durable
goods spending, as well as a 3.0% increase in services consumption,
the strongest since Q2 2006.
Net trade and inventory accumulation came in softer than expected
(the former adding 0.2pp to growth, the latter subtracting 1.1pp) but
this was offset by a stronger-than-expected gain in fixed investment,
particularly on equipment and software, which rose 17.4%, adding
1.2pp to overall growth.
Residential investment (2.4%) and government spending (0.0%) were
broadly neutral, close to market expectations. The first look at the
household income accounts was less upbeat. Real disposable income
declined 1.7%. Hence the rebound in consumption growth partly
reflected a decline in savings (the savings rate fell a percentage point
to 4.1%).
However, weakness in real disposable income was partly due to
consumer price inflation (up 2.4% q/q annualized). The easing of
headline inflation should provide a boost to real incomes in Q4.
There are reasons to expect better Q4 GDP data: (1) the rebound in
consumption was not an auto story (indeed, real auto consumption fell
modestly) but rather reflected strength in more heavily weighted and
less volatile services component, (2) strong profit and cash levels in
the corporate sector should underpin further gains in equipment and
software investment, and (3) the fall in inventory accumulation was a
sign that firms responded quickly to the softness in domestic demand
in H1, and is unlikely to be repeated in Q4. Our Q4 GDP tracking
estimate remains at 2.7%, and at 3.2% in Q1 2012.
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Summary - Macro and Tactical Allocation
OUTLOOK ON EQUITY MARKETS
Stocks surged, extending the biggest monthly rally in U.S. equities
since 1987. The S&P 500 Index rallied 2.3 percent yesterday, sending
its October gain to 12 percent and erasing its 2011 loss. Benchmark
gauges in France, Italy and Germany rose more than 5 percent and
German, Brazilian and Russian stocks extended gains from this year’s
lows to more than 20 percent.
We are looking at a new bull market in equities in the making. The
(partial) resolution of the euro sovereign debt crisis, signs that China
and U.S. economies will do moderately well for the rest of 2011, and
the Fed’s dispatching a brigade of governors to talk up QE3, laid the
groundwork for a multi-month rally which may last till Q1 2012
We are now at the tail end of our Sept 30 forecasts: we projected then
an S&P 500 rally to the 1250 - 1275 within three to four weeks, which
may be followed by another price reversion to the 1175 area. We also
recommended to get out whenever the 1250—1270 area is hit and
restart long positions at lower 1175 levels. Nonetheless, we also said
to expect the SPX to test the 1350 - 1375 highs by Q1 next year.
OUTLOOK ON BOND MARKETS
Treasury yields were sharply higher yesterday, pushing 10-year yields
15 bps to highest level in more than two months (2.37%), as partial
resolution of the eurozone crisis fueled appetite for higher-yielding
assets. Bond prices slid from Japan to Britain as stocks surged on
speculation that the eurozone accord will avert a global slowdown.
We are now at the tail-end of our Sept. 30 outlook for bond yields,
e..g., will will see a rise in 10yr yields to circa 2.45% - 2.48% in three
to four weeks, then followed by a pullback towards 1.85% - 1.90%,
then the rally in yield resumes. However, longer-term, we also said
that by Q1 2012, we project the 10yr yield to be at 2.75% - 2.80%.
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Summary - Macro and Tactical Allocation
OUTLOOK ON CURRENCIES/U.S. DOLLAR
The partial resolution of the eurozone debt crisis has had short-term
EUR-positive factors, including: 1) the outcome should lead to at least
near-term stability in terms of systemic financial risks in Europe; 2)
positioning remains significantly net short EUR; and 3) expectations
of repatriation by European banks to meet the new capital ratio likely
to be imposed could rise, underpinning the euro for some time
The U.S. Dollar and EUR are doing the end-game of our Sept 30
forecasts. We believed then that the USD rally was over, and may see
76.00 - 75.00 in three to four weeks. Conversely, EUR/USD models
showed that the sell-off was over and we may see 1.40 - 1.41 in three
to four weeks as well. Anytime at or below 76.00 - 75.00 area was a
cue to exit this short USD, and long EUR trade
We also projected that the subsequent counter move will see the US
Dollar recovering a large part of its losses, and could go back to 78.00
- 78.50 in DXY, and 1.3650 - 1.3600 in EUR/USD. Nonetheless, we
also said that resumption of risk taking over the rest of the year, and
into Q1 2012 will have the U.S. Dollar falling to new historic lows
OUTLOOK ON COMMODITY MARKETS—ENERGY
Our energy strategist asserts an average of Brent Crude oil price in
2011 at $108 and $112, and an average of $115 - $120 in H1 2012.
Those higher numbers are based on current evidence that Emerging
Markets and the Middle East continue to drive robust demand while
supply is stretched — strains are now appearing in non-OPEC supply
We are now looking at the end-phase of our Sept. 30 projections that
the Brent Crude front-month will retest $117/bbl resistance in three to
four weeks. A retracement phase may bring it back to circa $109.00.
The original target of $117/bbl may be beyond reach at this time —
time to get out of this trade if $14/bbl—$16/bbl area is reached
Nonetheless, we may to see Brent at $125/bbl - $127/bbl by Q1 2012.
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Summary - Macro and Tactical Allocation
OUTLOOK ON COMMODITY MARKETS—BASE METALS
Our base metal analyst asserts that LME copper prices should average
out between $9100/mton and $9300/mton in 2011. For 1H 2012,
copper prices may average at $9700/mton and $9900/mton. Current
demand continues to improve in Asia/China markets and a new uptick
in U.S. housing starts will add to underlying support for copper prices.
Our Sept. 30 forecasts are close to a finale: we said then that Copper
prices may improve to $8300/mton - $8500/mton over the next three
to four weeks, followed by a correction back to $7700/mton area
thereafter. The ongoing rally has been to $8300, which should prompt
an exit soon, looking for lower levels at circa $7700—$7600 to
reinstate long positions.
Nonetheless, by Q1 2012, we are also expecting copper to be back at
the $9700/mton - $1000/mton range.
OUTLOOK ON COMMODITY MARKETS—PRECIOUS METALS
Our precious metal analyst asserts that cash gold prices should
average out between $1,560/oz and $1,580/oz in 2011. For 1H 2012,
gold prices may average at $1,840/oz and $1,890/oz.
Still strong Asian physical demand for PGMs, allied with large gold
purchases from emerging countries’ central banks to diversify their
reserves should offset the impact of recent lower gold ETF demand
and bring strong support to gold and PGM prices
We forecasted on Sept. 30 that Gold prices will improve to $1,730/oz -
$1,750/oz in three to four weeks, followed by a correction back to
$1,670/oz area. Gold price hitting $1750 prompts an exit from the
long gold trade, then reinstate lower, probably at the $1675- $1660
Nonetheless by Q1 2012, we were also expecting gold prices to be
back at the $1,880/oz - $1,900/oz range.
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Summary - Macro and Tactical Allocation
Return - 1W
RICI Precious Metals Ix Total Return 5.3%
DCI Precious Metals Total return 4.9%
RICI Metals Ix Total Return 3.6%
DCI Base Metals Total return 3.5%
RICI Industrial Metals Ix Total Return 2.8%
DCI Crude Oil Total Return 2.8%
S&P 500 INDEX 2.7%
RICI Energy Ix Total Return 2.3%
MSCI World 2.2%
RICI Global Total Return 1.7%
DCI Global Total Return 1.7%
DCI Energy Total return 1.4%
Barclays Capital Bond Composite Global Index 0.4%
RICI Fibers Ix Total Return 0.2%
RICI Grains and Oilseeds Ix Total Return -0.1%
DCI Soft Total Return -0.1%
DCI Grains Total Return -0.2%
RICI Soft Ix Total Return -0.3%
RICI Agriculture Ix Total Return -0.3%
DCI Agriculture Total return -0.5%
Bloomberg USD vs EUR -1.0%
RICI Ix Lumber Total Return -2.1%
DCI Meat Total Return -2.2%
RICI Meats Ix Total Return -2.5%
-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
Source: Diapason
Return - 1M
DCI Crude Oil Total Return 9.7%
MSCI World 8.2%
DCI Precious Metals Total return 8.2%
RICI Energy Ix Total Return 8.2%
RICI Precious Metals Ix Total Return 7.5%
S&P 500 INDEX 6.8%
DCI Energy Total return 6.1%
DCI Soft Total Return 4.7%
DCI Global Total Return 4.5%
RICI Metals Ix Total Return 4.3%
RICI Global Total Return 4.2%
RICI Soft Ix Total Return 3.7%
DCI Base Metals Total return 3.2%
RICI Industrial Metals Ix Total Return 2.7%
RICI Meats Ix Total Return 2.0%
DCI Meat Total Return 1.9%
Barclays Capital Bond Composite Global Index 0.1%
DCI Agriculture Total return -0.2%
RICI Agriculture Ix Total Return -0.7%
RICI Fibers Ix Total Return -1.0%
RICI Grains and Oilseeds Ix Total Return -2.6%
Bloomberg USD vs EUR -2.7%
DCI Grains Total Return -2.8%
RICI Ix Lumber Total Return -8.8%
-10.0% -5.0% 0.0% 5.0% 10.0% 15.0%
Source: Diapason
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Summary - Macro and Tactical Allocation
Return - 3M
Bloomberg USD vs EUR 4.3%
Barclays Capital Bond Composite Global Index 2.2%
DCI Precious Metals Total return 1.2%
RICI Meats Ix Total Return 0.7%
DCI Meat Total Return 0.5%
RICI Fibers Ix Total Return -5.3%
RICI Precious Metals Ix Total Return -6.6%
S&P 500 INDEX -6.8%
DCI Crude Oil Total Return -8.4%
DCI Energy Total return -8.6%
RICI Energy Ix Total Return -8.9%
RICI Agriculture Ix Total Return -9.2%
DCI Agriculture Total return -9.2%
DCI Global Total Return -9.2%
DCI Soft Total Return -10.3%
MSCI World -10.6%
RICI Global Total Return -10.6%
RICI Soft Ix Total Return -10.9%
DCI Grains Total Return -11.3%
RICI Grains and Oilseeds Ix Total Return -11.4%
RICI Metals Ix Total Return -17.2%
DCI Base Metals Total return -21.0%
RICI Ix Lumber Total Return -21.8%
RICI Industrial Metals Ix Total Return -22.5%
-25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0%
Source: Diapason
Return - YTD
DCI Precious Metals Total return 17.4%
RICI Precious Metals Ix Total Return 8.5%
Barclays Capital Bond Composite Global Index 7.1%
DCI Energy Total return 3.1%
DCI Crude Oil Total Return 1.8%
RICI Energy Ix Total Return 1.4%
DCI Global Total Return -0.8%
DCI Meat Total Return -0.9%
S&P 500 INDEX -1.2%
DCI Soft Total Return -1.6%
RICI Meats Ix Total Return -2.8%
RICI Soft Ix Total Return -3.7%
Bloomberg USD vs EUR -3.7%
RICI Global Total Return -5.6%
MSCI World -6.2%
DCI Agriculture Total return -8.6%
RICI Metals Ix Total Return -10.5%
RICI Agriculture Ix Total Return -12.1%
DCI Grains Total Return -13.2%
RICI Grains and Oilseeds Ix Total Return -16.1%
DCI Base Metals Total return -18.7%
RICI Industrial Metals Ix Total Return -19.5%
RICI Fibers Ix Total Return -19.8%
RICI Ix Lumber Total Return -50.2%
-60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%
Source: Diapason
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Demand-Supply Factors: BASE METALS
China's Refined Copper Apparent Consumption, y/y change,
2-mth Average
300'000
Sources: Diapason, Chinese Customs
250'000
200'000
150'000
Metric Tonnes 100'000
50'000
-
-50'000 Apparent Consumption is calculated
as production + net imports
-100'000
-150'000
-200'000 Dec-07
Dec-08
Dec-09
Dec-10
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Base metals have strongly rallied in the past three days, on strong China PMI and a
reassuring European summit. Copper has been the best performer, up by 14%, as sup-
ply issues were added to the global improving picture.
Copper fundamentals remain solid. In September, China posted the fourth consecu-
tive month of increase in apparent consumption (calculated as production + net im-
ports). September imports hit a 16-month high, completely offsetting the impact of
lower production (-8%), due to usual maintenance. Our view regarding China’s de-
mand is supported by steady Chinese physical delivery premiums and a by surge in
LME cancelled warrants. LME cancelled warrants amount to 62,750 and represent
now 14.3% of global LME inventories, a first since May 2009. China is indeed with-
drawing copper from global LME warehouses to replenish its own stocks.
China’s inventories remain too low to meet domestic demand: SHFE stocks total
87,726 tonnes (4 days of domestic consumption). China should thus continue to im-
port copper in the coming months to replenish its stocks. On the other hand, we be-
lieve LME inventories will decline in the coming weeks as producers have lowered
production and as the almost-flat contango will discourage speculators to stock.
Supply disruption persists, with lower ore grades in Latin America and a strike at
Grasberg mine in Indonesia, one of the world’s largest copper mine, where force ma-
jeure has been declared. The strike already caused a loss of 30k tonnes of copper.
Lead fundamentals remain really poor as the market is tending to a massive 175,000-
tonne surplus this year. Inventories hit a record high two weeks ago, while China has
closed some of the largest lead-consuming industries on environmental concerns.
As tin prices have remained above $22,000 for two weeks, some Indonesian produc-
ers (world’s largest exporters) have resumed exports, lifting the export ban.
Aluminium prices are sustained by a tight Chinese market and by high production
costs as current prices equal the marginal cost of production (≈ $2,200/t).
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Demand-Supply Factors: PRECIOUS METALS
Shanghai Gold Exchange, Gold price, Yuan per Gram
400
380
360
340
320
300
280
260
240
220
200
Nov-09
Nov-10
May-10
May-11
Dec-09
Dec-10
Oct-09
Jan-10
Feb-10
Mar-10
Apr-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Jan-11
Feb-11
Mar-11
Apr-11
Jun-11
Jul-11
Aug-11
Sep-11
Gold has strongly rebounded this week and stand now above $1,700/oz. Gold demand
should continue to increase strongly, especially in developing countries. India’s gold
demand, the world’s second largest buyer, should hit a record of 1,000 tonnes this fi-
nancial year (starting in April) amid growing rural incomes. The ongoing festival sea-
son should also spur Indian gold purchases upwards.
China’s gold demand has also been very strong recently. The Shanghai Gold Ex-
change reopened on October 10, after the week holiday, to show the highest daily vol-
ume on record. The premium of the SGE price over London AM fix rose to nearly
$30/oz, the highest since August and one of the highest in 2011.
Central banks are also strong drivers of gold prices as they have become active net
buyers after two decades of net selling. Emerging countries are very active, as gold
still represents a small portion of their reserves (average 5%, 2% as for China).
Silver’s large use in industrial application has continued to hit prices. However, sales
of coins have remained remarkable: January-September sales of US Eagle Silver
coins exceeded by 8m ounces the same period in 2010.
We remain positive on palladium as the market should be in deficit this year (contrary
to platinum). In addition, Russia has announced that stockpiles sales, which repre-
sented the fourth largest source of supply last year, should total only 9 tonnes in 2012
and 2013 altogether and should then completely stop from 2014, as inventories are
almost exhausted.
China’s PGMs imports rose in September, with platinum more than doubling y/y and
were the strongest since April this year, at 264,000 ounces. Year to data imports
turned positive and were up 11% y/y. It seems that the steep decline in platinum prices
at the end of September encouraged physical demand in China.
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Demand-Supply Factors: ENERGY
Japanese Nuclear Capacity Factor
80%
Sources: Diapason, FEPC
70%
60%
50%
40%
30%
20%
10%
0%
juil.09 oct.09 janv.10 avr.10 juil.10 oct.10 janv.11 avr.11 juil.11 oct.11
Japanese kerosene demand is likely to be stronger than usual this be-
cause of fear of power outages. Kerosene is used for heating purposes
in Japan.
Chinese apparent oil demand in September increased by only 3.1 per-
cent y/y to 8.95 million b/d, the lowest level for the year, down from
8.98 million b/d in August. Net crude oil imports were also down at
4.92 million b/d, down 12.1 percent y/y. Crude oil production in China
fell by 5.2 percent y/y in September to 3.98 million b/d, the lowest
since April 2010.
Supply disruptions in the North Sea continues, leading to delayed and
cancelled cargoes in November.
Saudi Arabia cut its crude oil production by 300’000 b/d to 9.5 million
b/d, leading to an increase of spare capacity to 2.54 million b/d.
Azeri crude oil production remained constrained because of additional
maintenance operations. This is likely to lead to an y/y decline of out-
put.
Petrobras announced that it will finish 2011 at the lower range of its
production target to around 2.1 million b/d after a global bottleneck
delayed rig deliveries.
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Demand-Supply Factors: ENERGY
Midwest Crude Oil Inventories 2011
108000 -7.0
2011 Inventories Level (rhs)
106000 WTI Time Spread 1-3 (Inverted, lhs) -6.0
104000 -5.0
102000 -4.0
Thousand Barrels
100000 -3.0
98000 -2.0
96000 -1.0
94000 -
Sources: Diapson, EIA
92000 1.0
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Crude oil inventories in the Midwest have fallen these past weeks de-
spite the maintenance season, adding upside on WTI.
Petroleum products in Singapore are now at or below the 5-year aver-
age, reflecting the tightness of the Asian market (also reflected into the
Brent-Oman spread and the Oman time spread).
Shell announced force majeure on its 150’000 b/d crude oil exports
from the Forcados oil field in Nigeria for October, November and De-
cember , offset the end the force majeure on crude oil exports from the
Bonny Light field.
US natural gas prices are close to the marginal cost of production.
Several gas producing companies have announced that they are having
difficulties with such prices and are increasing their exposure to oil.
Further signs of slower production growth and an improvement of the
economic outlook for the rest of the year are needed to boost US gas
prices.
Net injections of natural gas have been more important than usual
these past weeks. Net injections are likely to become negative by mid-
November.
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Demand-Supply Factors: Agriculture
The U.S. Grains Council, which just completed a crop tour in China,
said the record harvest won't be enough to meet demand in the world's
most populous nation, where expanding consumption of meat is un-
dermining decades of self-sufficiency and helped fuel the record surge
in prices earlier this year. Consequently, China may need to import
five times as much corn as the U.S. government expects over the next
year setting the stage for another potentially explosive year for prices.
China's September 2011/August 2012 soybean imports are likely to
rise to 58.50 million tonnes from 52.85 million in 2010/11 with con-
tinued Chinese buying set to support soy prices, Oil World said this
week. "China's dependence on soybean imports has already reached
alarming proportions and is set to increase further in 2011/12 owing to
declining domestic soybean output and rising demand," Oil World
said.
"The large import requirements are likely to meet limited export sup-
plies, which will probably contribute to a reversal of the recent down-
trend in soybean prices in the foreseeable future." The soybean import
forecast is up 0.2 million tonnes from Oil World's September estimate
and means the country will need to import around 1.1 million tonnes a
week.
Reduced production of soybeans in the U.S. and expectations that
South America's crop won't make up for the shortfall could push in-
ventories to historic lows by next summer, boosting prices.
U.S. soybean prices have been mostly stagnant this year, masking a
decline in U.S. production. Farmers increasingly favour planting
more-lucrative crops such as corn, which yields a larger crop per acre,
making the grain more profitable at current prices. Some South
American farmers also are shifting to higher-priced crops.
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Demand-Supply Factors: Agriculture
The wheat market is expected to be broadly balanced for the season
2011/2012. The IGC forecasts world production to reach 677 mt and
world consumption to reach 678 mt as of August 2011.
Intense monsoon rains, typhoons and tropical storms have flooded
more than 2.5 million hectares of cropland in Cambodia, Laos, the
Philippines, Thailand and Vietnam. In worst-hit Thailand, 1.6 million
hectares--12.5% of the area under crops nationwide--has been flooded,
along with an estimated 12% of acreage in the Philippines and 7.5%
of plantings in Cambodia.
Russian Prime Minister Vladimir Putin told grain traders they had fair
warning of plans to introduce protective tariffs on grain if their ex-
ports threatened domestic supplies, and told them to avoid signing
"excessive" contracts.
South American soybean harvests in early 2012 may be larger than
previously expected but Argentine farmers may turn towards planting
more grains. South American soybean production may exceed expec-
tations in early 2012. Planting and growing conditions improved sig-
nificantly in the last 2-3 weeks after the required rainfall had arrived
in most major soybean growing areas.
Global soybean supplies are currently sufficient to cover demand, but
only by reducing stocks which in turn will raise world dependence on
South American harvests in early 2012. There has been recent concern
about dryness in Brazil, the world's second largest soybean producer.
A developing La Nina weather event will be considerably weaker than
the record strong 2010/11 La Nina that wreaked havoc along Austra-
lia's eastern seaboard, Australia's weather bureau said this week. The
tropical Pacific Ocean is now in the early stages of a late forming La
Nina event.
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Recommended Allocations
SECTORS: There are no changes in the allocations
Energy: 35 pct Sectors Allocations
Energy Base Metals Precious Metals Agriculture
Base Metals: 25 pct 15%
35%
Precious Metals: 25 pct
25%
Agriculture: 15 pct 25%
BASE METALS: There are no changes in the allocations
Tin: 15 pct
Aluminium: 25 pct Base Metals Allocations
5%
Copper: 35 pct 15%
5% 15% Tin
Aluminium
Copper
Nickel: 15 pct 25%
Nickel
Lead
Zinc
Lead: 5 pct 35%
Zinc: 5 pct
ENERGY : There are changes in the allocations
Crude Oil WTI: 20
Crude Oil Brent: 30 pct Energy Allocations
15% 20%
Gasoline: 20 pct 15%
WTI
Brent
Gasoline
Heating Oil
Heating Oil: 15 pct Natural Gas
20% 30%
Natural Gas: 15 pct
PRECIOUS METALS: There are changes in the allocations
Palladium: 20 pct
Silver: 25 pct P re c io us M e ta ls Allo c a tio ns
20%
Platinum: 10 pct 4 5% P a lla dium
S ilve r
P la t inum
Gold: 45 pct 2 5%
Gold
10 %
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Recommended Allocations
AGRICULTURE: There are no changes in the allocations
Grains: 80 pct
Corn: 40 pct
Soybean: 25 pct Agriculture Allocations
3%
2% 7% Corn
Wheat: 15 pct 8%
40%
Soybean
Wheat
Soft: 20 pct Sugar
Cocoa
15% Coffee
Sugar: 8 pct 25% Cotton
Cocoa: 2 pct
Coffee: 7 pct
Cotton: 3 pct
DCI and Sectors’ Performance 2009-2011
DCI and Sectors Performance 2009-2011
DCI Agriculture Total return DCI Base Metals Total return DCI Energy Total return
DCI Precious Metals Total return DCI Total return
250
225
200
175
Jan-09 = 100
150
125
100
75
50
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11
Source: Diapason
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Contact Information
Diapason Commodities Management S.A Diapason Commodities Management UK LLP
Malley Lumières 18 Upper Brook Street
Chemin du Viaduc 1 5th floor
Case Postale 225 London
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SWITZERLAND United Kingdom
+41 21 621 13 10 +44 207 290 2260
www.diapason-cm.com www.diapason-cm.com
Sales Team _ ________
Salvatore Miserendino Sébastien Max Waleed Albahr
Head, Marketing & Business Sales Sales
Development
Tel : +44 207 290 2260 Tel: +41 21 621 13 15 Tel: +44 207 290 2262
Salvatore.miserendino@diapason-cm.com sebastien.max@diapason-cm.com waleed.albahr@diapason-cm.com
Xavier Gendre Chiharu-Claire Nishida
Sales Sales
Tel: +41 21 621 13 12 Tel: +41 21 621 13 14
xavier.gendre@diapason-cm.com chiharu-claire.nishida@diapason-.com
Research and Indices Team
Sean Corrigan Robert Balan Alessandro Gelli
Chief Investment Strategist Sr. Market Strategist Energy Fundamental Research
sean.corrigan@diapason-cm.com robert.balan@diapason-cm.com alessandro.gelli@diapason-cm.com
Cyril Camilleri Fabien Espic Marion Megel
Indices and Quantitative Research Indices and Quantitative Research Metals Fundamental Research
cyril.camilleri@diapason-cm.com fabien.espic@diapason-cm.com marion.megel@diapason-cm.com
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General Disclosure
This document or the information contained in does not constitute an offer or a solicitation, or a rec-
ommendation to purchase or sell any investment instruments, to effect any transactions, or to con-
clude any legal act of any kind whatsoever. The information contained in this document is issued for
information only. An offer can be made only by the approved offering memorandum. The invest-
ments described herein are not publicly distributed. This document is confidential and submitted to
selected recipients only. It may not be reproduced nor passed to non-qualifying persons or to a non
professional audience. For distribution purposes in the USA, this document is only intended for per-
sons who can be defined as “Major Institutional Investors” under U.S. regulations. Any U.S. person
receiving this report and wishing to effect a transaction in any security discussed herein, must do so
through a U.S. registered broker dealer. The investment described herein carries substantial risks and
potential investors should have the requisite knowledge and experience to assess the characteristics
and risks associated therewith. Accordingly, they are deemed to understand and accept the terms,
conditions and risks associated therewith and are deemed to act for their own account, to have made
their own independent decision and to declare that such transaction is appropriate or proper for
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Certain statements in this presentation constitute “forward-looking statements”. These state-
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lar meaning. Such forward-looking statements are subject to known and unknown risks, uncertain-
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implied by such forward-looking statements. These risks, uncertainties and assumptions include,
among other factors, changing business or other market conditions and the prospects for growth.
These and other factors could adversely affect the outcome and financial effects of the plans and
events described herein. Consequently, any prediction of gains is to be considered with an equally
prominent risk of loss. Moreover, past performance or results does not necessarily guarantee future
performance or results. As a result, you are cautioned not to place undue reliance on such forward-
looking statements.
These forward-looking statements speak only as at the date of this presentation. Diapason expressly
disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-
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The information and opinions contained in this document are provided as at the date of the presenta-
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All rights reserved. “DIAPASON COMMODITIES INDEX”, “DCI”, “DIAPASON COMMODI-
TIES MANAGEMENT” and “DIAPASON” are trademarks and service marks of Diapason. “UBS
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Paribas” and “BNPP” are trademarks and service marks of BNP PARIBAS, “DJ-UBS” are trade-
marks and service marks of UBS, and “SP GSCI” are trademarks and service marks of the
McGraw-Hill Companies Inc. “Jim Rogers”, "Rogers", “Rogers International Commodity Index”,
and "RICI" are trademarks and service marks of Beeland Interests, Inc. (“Beeland Interests”)
which is owned and controlled by James Beeland Rogers, Jr., and are used subject to license.
All proprietary rights with respect to the DCI and any component thereof belong to Diapason, with
respect to the UBS Diapason Global Biofuel Index and any component thereof belong to Diapason
and UBS AG, with respect to the DCI BNP Paribas Enhanced Index and any component thereof to
Diapason and BNP PARIBAS, with respect to the DJ-UBS to UBS, with respect to the SP GSCI to
McGraw-Hill Companies Inc., with respect to the RICI and any component thereof belong to Bee-
land Interests (the DCI, the DCI BNP Paribas Enhanced Index, the DJ-UBS, the SP GSCI, the
RICI® hereafter individually an “Index”, collectively the “Indexes” and each of their owners, an
“Index Owner”).
The Index Owners and their affiliates do not sponsor, endorse, sell or promote Diapason products by
this documentation and make no representation or warranty, express or implied, nor accept any re-
sponsibility, regarding the accuracy or completeness of this presentation, or the advisability of in-
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Any third party product based on or in relation to the Indexes may only be issued upon the prior
written approval of their respective owners and upon execution of a licensing agreement between
those parties and the party intending to launch a product.
The Index Owners and their affiliates disclaim any liability to any party for any inaccuracy in the
data on which their respective Index are based, for any mistakes, errors, omissions or interruptions
in the calculation and/or dissemination of such Indexes, or for the manner in which they are applied
in connection with the issue and offering of a product. The Index Owners and their affiliates make
no warranty, express or implied, as to results to be obtained by owners of products, or any other per-
son or entity from the use of their respective Index, any data included therein or linked therewith or
products based thereon. The Index Owners and their affiliates do not make any express or implied
warranties, and expressly disclaim all warranties of merchantability or fitness for a particular pur-
pose or use with respect to their respective Index and any data included therein. Without limiting any
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profits or indirect, punitive, special or consequential damages or losses, even if notified of the possi-
bility thereof.
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Copyright
© Diapason Commodities Management SA 2011
Any disclosure, copy, reproduction by any means, distribution or other action in reliance on the con-
tents of this document without the prior written consent of Diapason is strictly prohibited and could
lead to legal action.
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