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Market turmoil creating opportunity in resources

Not enough investment is going towards future commodities supply, but global uncertainty is hitting the average price of natural resource stocks, argues Robeco in a white paper.

Market turmoil creating opportunity in resources
Peter Csöregh of Robeco sees key opportunities in natural resources

The global economy’s structural problems are masking a worsening supply-demand balance across key commodities, creating investment opportunities in natural resources, finds Robeco in a new white paper.

Fund manager Peter Csöregh writes that capital expenditures were already lagging demand when the credit crunch hit investments into resources and infrastructure projects. At the same time demand for energy, water and agricultural products and many metals is set to double between now and 2030.

The problem is not scarcity in general, but scarcity of resources in low-risk areas, argues Csöregh. Nationalisation is also back on the political agenda, while taxes, royalties and regulations are becoming more onerous, and environmental legislation is having an impact.

The result is that not enough investment is going towards the future supply of commodities, and the world is headed to an era of shortages and higher commodity prices in the short term.

But the potential recession roiling global markets is creating opportunities in natural resources. Csöregh notes the average resource stock now trades at a 50% discount to net asset value.

Meanwhile, exchange-traded commodity prices are, on average, 25% down from highs, and non exchange-traded commodities are expected to weaken into year-end.

If you want to read Csöregh’s thoughts in detail, click here for the white paper.

© Haymarket Media Limited. All rights reserved.

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