[Real Investment] Commodity Funds as Stock Market Havens Also Face Return Humiliation

[Asia Economy Reporter Kwon Jae-hee] Commodity funds, which had emerged as an alternative investment destination amid the sluggish stock market this year, have also recorded negative returns. This is due to commodity prices, which had soared to unprecedented levels because of the Russia-Ukraine war, turning downward recently amid concerns over an economic recession and the impact of the U.S. tightening policies. As a result, the returns of commodity funds have plummeted, accelerating capital outflows.

According to fund rating agency FnGuide on the 4th, the recent 3-month (as of July 29) return of commodity ETFs (Exchange-Traded Funds) was -7.12%. This is worse than the returns of stock ETFs (-0.78%) and asset allocation ETFs (-1.12%) during the same period. Although the year-to-date return is positive at 2.66%, the returns of commodity funds, which are considered a refuge from the sluggish stock market, have recently deteriorated.

The decline is even more pronounced when looking at returns over different periods. Stock, bond, alternative investment, and asset allocation ETFs all recorded negative returns over the past year but gradually reduced their losses and turned positive. However, commodity ETFs widened their losses from -0.44% over the past year to -7.12% in the recent 3 months.

The poor performance of commodity funds is attributed to the perception that inflation has peaked, along with concerns about future demand slowdown, global economic weakness, a strong dollar, and U.S. tightening policies, which have caused commodity prices to plunge. On the previous day (local time, August 2), the September delivery futures price of West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange (NYMEX) slightly rose to $94.42 per barrel compared to the previous trading day, but this was merely a rebound buying after nearly a 5% drop in the prior session. WTI has fallen from $111.80 per barrel a month ago to around $90 currently.

Not only crude oil but major minerals are also on a downward trend. Copper, considered a barometer of the real economy and used in various industries such as electronics, automobiles, and construction, is weak. On the London Metal Exchange (LME), copper traded at $7,712 per ton on July 28. The copper price falling to the $7,000 per ton level is the first time since February last year. Nickel, aluminum, and cobalt are also declining.

The Brazilian stock market, which has a high proportion of energy and commodity companies and moves in line with commodity prices, has also recently fallen sharply. The Brazilian stock market, which rose about 20% from January to May this year, has dropped nearly 10% in the past month.

Experts advise caution in investing as commodity price forecasts are mixed and volatility is high.

Choi Jin-young, a researcher at Ebest Investment & Securities, said, "Commodities, which have a lagging nature in the economic cycle, peaked only after bonds and stocks passed their peaks," advising, "Investors should consider this when making investment decisions." Kim Hoo-jung, a researcher at Yuanta Securities, also said, "Some investors who believe commodity prices have peaked are taking partial profit-taking positions," adding, "It is prudent to be cautious about predicting further rises in commodity prices and investing at this point."

This content was produced with the assistance of AI translation services.