The Hindu Business Line : Investor interest unabated in commodities

Mumbai March 18 Investor interest in commodities is unabated. Contrary to belief prompted by concerns over price volatility in early 2007 that commodity sector might see a withdrawal of investor interest, more funds are actually flowing into the market.

Non-commercial participation in the commodity markets continues to increase, suggesting that speculators and investors are bullish and see value in commodity investment.

Indeed, hedge funds are becoming more active than they were before. Less than 10 per cent of total hedge funds are invested in commodities.

Fresh highs

In several of the major commodity futures, non-commercial positions, both long and short, have continued to set fresh all-time highs on a regular basis so far in 2007. For instance, CFTC's commitment of traders report data showed a substantial increase in non-commercial long exposure to oil and refined products markets.

On NYBOT, tactical investors increased their net positive exposure to sugar significantly, while speculators increased their positive exposure to cotton market. Net fund length rose modestly in the cocoa market.

Hedging

Meanwhile, CFTC data show that non-commercial positions attributable to hedging by commodity index traders are also continuing to expand, though at a slower rate.

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