With such a grab for global resources in China, we are often asked if there are enough to go around and how prices are affected. These are precisely the questions that Daniel Gross and Aaron Task from Yahoo’s Daily Ticker asked Evan Smith, co-portfolio manager of the Global Resources Fund (PSPFX).
Commodity prices tend to move in tandem with Chinese demand, says Evan. Over the past decade or so, he says the country routinely accounts for a third, a half or as much as 70 percent of all demand for any particular commodity.
When determining China’s future growth, Evan points to many indicators that our investment team reviews: automobile sales, exports from a certain country and the Baltic Dry Freight Index, to name a few. Although China’s rate of growth may slow, Evan says, “From a commodities perspective, you’re at such a large level of demand that the growth rate may go from 10 percent to 5 percent, but the absolute volume in demand each year is actually increasing each year off a larger base.”
Evan also discusses the country’s emergence in global gold consumption and production.
Also read:
American Classic Finds New Life in China
How China Drives the Global Economy
With Rising Wages, Will China Remain a Manufacturing Hub?
Case Study: Buyouts Crystallize Value in the Market
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Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.
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The Baltic Dry Freight Index is an economic indicator that portrays an assessed price of moving major raw materials by sea as compiled by the London-based Baltic Exchange.
