Commodities post biggest annual gain in 4 decades

 

LONDON: Commodities posted the biggest annual gain in four decades, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the longest slump in the global economy since World War II.

In 2009, the S&P GSCI Index of 24 raw materials rose 50 per cent, the most since at least 1971, and commodities drew record investment of US$60 billion this year, Barclays Capital estimated. This year, the MSCI World Index of stocks in 23 developed nations climbed 27 per cent, and US Treasuries fell 3.5 per cent, according to Bank of America Merrill Lynch indexes.

China, the biggest consumer of commodities such as copper and iron ore, expanded 8.5 per cent this year, according to the median estimate of economists surveyed by Bloomberg. The nation imported record amounts of both raw materials this year, making up for slack demand in the US and Europe.

"If you look at the theoretical or global portfolio of assets that are out there, the percentage of commodities allocation is tiny, less than 1 per cent," said Kevin Norrish, a commodity analyst at Barclays Capital in London. "If you look at what investors think that they should have, clearly that would suggest there's a lot of potential for growth."

This year, the Reuters/Jefferies CRB Index of 19 raw materials advanced 23 per cent, the most since 1979.

China's central bank will maintain a "moderately loose" monetary policy because 2010 will be a crucial year for strengthening the recovery, Governor Zhou Xiaochuan said yesterday.

Among industrial metals traded in London, lead posted the biggest gain. Since the end of 1999, the metal more than quadrupled, leading gains among 36 exchange-traded raw materials in the US, Europe and Asia.

Copper also doubled this year, leading gains in the CRB gauge. The metal climbed almost fourfold in the decade.

Lead for delivery in three months rose US$21, or 0.9 per cent, to US$2,432 a metric tonne yesterday on the London Metal Exchange. Copper gained 0.6 per cent to US$7,375 a tonne.

In 2009, gold futures in New York rose 24 per cent, the ninth straight annual gain. The dollar's slump spurred demand for precious metals as an alternative investment.

Crude oil gained 78 per cent this year. The Organisation of Petroleum Exporting Countries, accounting for 40 per cent of global supply, cut output in response to the worldwide economic slump.

Raw-sugar futures in New York more than doubled this year, trailing only copper's advance in the CRB index. Cane harvests in Brazil and India, the biggest producers, were hurt by adverse weather. - Bloomberg