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Time to short sugar, coffee and soybeans

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ETF Securities Commodity Research - Time to short sugar, coffee and soybeans Sugar, coffee and soybeans have made spectacular returns this year, but much of their gains have been driven by currency movements, particularly the Brazilian Real.

ETF Securities Commodity Research – Time to short sugar, coffee and soybeans

Summery

  • Sugar, coffee and soybeans have made spectacular returns this year, but much of their gains have been driven by currency movements, particularly the Brazilian Real.
  • With record production of Arabica coffee and soybeans expected in 2016/17 and a narrowing deficit in sugar, the rally is likely to come under pressure.
  • If the Brazilian Real remains stable, we expect fundamentals to prevail and the price of these sugar, coffee and soybeans to decline.

Brazilian Real drives rally

The El Niño weather pattern led to a failed monsoon in India and unseasonably wet weather in South America in 2015/16. However at the time of onset of the adverse weather, the price of sugar, coffee and soy made only muted moves. The sharp depreciation of the Brazilian Real weighed on their performance as stocks of these commodities could be sold in US Dollars, providing millers and farmers with improved margins. When the Brazilian Real started to appreciate we saw the price of the commodities make substantial returns. Year-to-date, sugar, coffee and soybeans have returned 35%, 19% and 25% respectively.

ETFS1

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Weather patterns changing

The El Niño of 2015 was one of the most extreme on record by some measures, but the impacts of the weather phenomenon should be largely behind us now. The National Oceanic and Atmospheric Administration forecasts that the opposite weather phenomenon, La Niña, will emerge by the Northern Hemisphere autumn with a probability of 75%. La Niña involves a cooling of the Pacific Ocean (in a similar manner to El Niño warming the ocean), which changes trade winds and weather patterns from what is considered to be normal. Broadly speaking, areas that were excessively warm and dry in El Niño are likely to turn cool and wet in a La Niña. We assessed the likely impacts of La Niña emerging in autumn/winter (see Opportunity to short agriculture with La Niña) which highlights that the weather phenomenon is likely to be price negative for many crops with the exception of sugar. Cooler Southern Hemisphere temperatures are likely to reduce the heat damage that we have seen in the past crop. Sugar maybe an exception as cooler, wetter weather could reduce the sucrose content of cane in Brazil.

ETFS2

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Record coffee production

After two consecutive years of production decline, coffee output is expected to rebound to an all-time high. Brazil, which produces approximately 45% of global Arabica supplies has seen favourable rain during the flowering of its coffee bushes, setting the scene for a healthy crop. Although the beginning of the harvest has been slowed by rain, current dry and warm weather should allow for field work to catch up. Brazilian output is expected to rise by close to 20% in the current 2016/17 crop.

Elsewhere, production in Honduras (7% of global production) is expected to make a recovery after the planting of ‘rust- resistant’ trees several years ago, which is helping to improve yields. The country has engaged in a renovation programme to protect its coffee from the rust-leaf fungus which has reduced production from Central America and Mexico for the past four years. Honduran production is likely to hit an all-time high of 6.1 mn bags (a 7% gain).

ETFS3

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Narrowing sugar deficit

After 5 consecutive years of sugar surplus, 2015/16 was the first year of a deficit. The failed monsoon in India and Thailand has seen production in these two countries decline the most (the combined output of both countries is about 25% of global production). Production in Brazil (20% of global production) also declined, not because of a decline in cane growth, but because more cane was used for ethanol production.

The 2016/17 cane harvest in Brazil, which is about a quarter complete, is progressing 15% faster than last year’s harvest. With relatively low gasoline prices we don’t expect a large diversion to ethanol this year. Sugar production in Brazil is running 25% ahead of where it was last year and we expect a 7% increase in Brazilian sugar output in 2016/17.

ETFS4

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The Indian monsoon is currently approaching its northern limits and rainfall has been at the long-term average. In contrast to last year, resevoirs will likely be amply replenished. Indian sugar output is likely to rise as a result of more favourable conditions for its cane crop.

Sugar consumption is expected to rise by 1% globally, leaving the market in a production deficit despite the increase in supply. However, that supply deficit will narrow. While sugar stocks will continue to decline, they will remain above the long-term average of 31 million tonnes.

Soybeans head for record production

The Argentine soybean harvest in 2015/16, which is virtually complete, is expected to produce 8% less soybeans that the previous year as flooding in April and May spoiled the crop. Argentina provides approximately 20% of global production. Brazil (30% of global production) has seen its harvest remain close to the previous year’s levels. The 2016/17 year crop for Argentina and Brazil has not yet been planted.

The US 2015/16 crop was a record high. Although USDA projects a decline for 2016/17, we believe that their forecast remains overly conservative. By July 3rd 2016, 22% of the crop was blooming (8% ahead of last year) and 72% of crop was in good or excellent condition (10% better of last year). Moreover, planted acreage of soybean in the US has increased by 1%.

ETFS5

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Speculative positioning in soybean futures stand more than 1.5 standard deviations above the 5-year average, highlighting that investor optimism remains elevated. We believe that the investor optimism is a response to the disappointing Argentine crop of 2015/16. While the 2016/17 Southern Hemisphere crop is not yet in the ground, our analysis of La Niñas indicate that weather conditions could be quite favourable for the crop this year.

Downside risk to Real

While difficult to predict the path of a currency that has been so volatile in the past few years, we believe that the good news about relative political stability (after the impeachment of the President Dilma Rousseff) has been largely priced in. Economic conditions remain challenging for the country and therefore limit significant further appreciation. We believe that currency appreciation will no longer be a meaningful catalyst for price increases in sugar, soybean and coffee for the remainder of this year and the crops will trade on their own fundamentals. Rising production should therefore be price-negative.

Important Information

General

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”).

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

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AINJ ETP spårar INJ och skapar staking intäkter

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21Shares Injective Staking ETP (AINJ ETP) med ISIN CH1360612134 är 100 procent fysiskt uppbackad. 21Shares Injective Staking ETP (AINJ) spårar prestanda för INJ samtidigt som den skapar staking intäkter som återinvesteras i ETP för förbättrad prestanda. Medan blockchain-nätverk vanligtvis är siloförsedda, stöder Injective Protocol sömlösa interaktioner över stora nätverk, vilket möjliggör ett unikt utbud av finansiella produkter och tjänster. 21Shares Injective Staking ETP erbjuder ett enkelt, reglerat och transparent sätt att dra nytta av nätverkets växande betydelse inom decentraliserad finans (DeFi).

21Shares Injective Staking ETP (AINJ ETP) med ISIN CH1360612134 är 100 procent fysiskt uppbackad. 21Shares Injective Staking ETP (AINJ) spårar prestanda för INJ samtidigt som den skapar staking intäkter som återinvesteras i ETP för förbättrad prestanda. Medan blockchain-nätverk vanligtvis är siloförsedda, stöder Injective Protocol sömlösa interaktioner över stora nätverk, vilket möjliggör ett unikt utbud av finansiella produkter och tjänster. 21Shares Injective Staking ETP erbjuder ett enkelt, reglerat och transparent sätt att dra nytta av nätverkets växande betydelse inom decentraliserad finans (DeFi).

Fördelar

Innovativ teknik: Injective erbjuder ett avancerat DeFi-ekosystem med funktioner som noll gasavgifter och omedelbar slutgiltig transaktion, vilket förbättrar användarupplevelsen på finansiella kryptoapplikationer.

Staking med lätthet: Med AINJ kan investerare få tillgång till r med fördelen av professionell riskhantering samtidigt som de undviker behovet av att direkt låsa tillgångar.

100 % fysiskt uppbackad: 21Shares Injective Staking ETP är 100 % fysiskt backad av den underliggande INJ och förvaras i kylförvaring hos ett institutionellt förvaringsinstitut, vilket erbjuder ett bättre skydd än depåalternativ som är tillgängliga för enskilda investerare.

Nyckelinformation

Handla AINJ ETP

21Shares Injective Staking ETP (AINJ ETP) är en börshandlad kryptovaluta (ETP) som handlas på Euronext Amsterdam.

Euronext Amsterdam är en marknad som få svenska banker och nätmäklare erbjuder access till, men DEGIRO gör det.

Börsnoteringar

BörsValutaKortnamn
Euronext AmsterdamUSDAINJ NA
Euronext ParisEURAINJ FR

Produktinformation

Namn21Shares Injective Staking ETP
Lanseringsdatum9 juli 2024
Emittent21Shares AG
Förvaltningsarvode2,5%

Handelssymboler

KortnamnAINJ
Valor136061213
ISINCH1360612134
ReutersAINJ.S
WKNA4AHQC
BloombergAINJ BW

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Mexico’s post-election potential and investment opportunities

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Given Mexico’s vast potential and President-elect Claudia Sheinbaum’s track record of progress during her time as mayor of Mexico City, Franklin Templeton’s Dina Ting thinks that investors should be monitoring opportunities to enter this compelling market.

Given Mexico’s vast potential and President-elect Claudia Sheinbaum’s track record of progress during her time as mayor of Mexico City, Franklin Templeton’s Dina Ting thinks that investors should be monitoring opportunities to enter this compelling market.

Just how well—or not so well—Mexico’s President-elect Claudia Sheinbaum may be able to tackle the country’s prevailing challenges is still up for debate. Sheinbaum’s commanding margin of victory in the June election discouraged some investors amid fears that her ruling Morena party could potentially push through constitutional reforms that may adversely impact Mexico’s business environment.

Since the outcome of the US presidential election will remain undecided for a month after Sheinbaum takes office in October, we expect Mexico’s equity markets to experience more short-term market volatility. But given Mexico’s ongoing potential to capitalize on nearshoring investments and Sheinbaum’s track record of progress during her time as mayor of Mexico City (beginning in 2018), we think investors should be monitoring opportunities to enter this compelling market. We believe a continuation of US macro drivers are still poised to drive Mexican exports. Although US appetite for Chinese imports was still high even as recently as 2022, the drop-off in trade with China since then has benefited Mexico, which recently eclipsed both China and Canada to become the biggest US trade partner.

Mexico’s first female president

A protégé of outgoing President López Obrador (or AMLO as he is known), Sheinbaum has pledged to continue along the political course of her predecessor. But as a climate scientist with a Ph.D. in environmental engineering, she appears to us to be more attuned to pressing issues, such as Mexico’s water woes and efforts toward the energy transition. She has demonstrated deep, technical expertise and perspective on vital issues—“not simply as stewardship of natural resources, but also as an issue interconnected with education, social justice, health care, housing and infrastructure,” according to the think tank Atlantic Council.

There is hope that the public-private partnerships that Sheinbaum advanced during her time as Mexico City’s mayor could be a model that she adopts and adapts in her new administration to increase the number of strategic projects. These may include opening natural gas production and transportation to private participants, boosting infrastructure and more renewable energy projects that are critical for Mexico to take advantage of nearshoring-related investment opportunities.

Since renewables like solar and wind currently make up only about 12% of the electricity mix in Mexico (significantly lagging the 16% share for the United States), there is great potential for the country’s clean energy buildout. Sheinbaum has pledged to change course from AMLO in her approach to speeding the promotion of renewable energies with a US$13.6 billion investment plan through 2030 that includes pioneering development of smart grids and other green technologies. Experts have praised Sheinbaum’s methodical approach to governance, for example, bringing stability and predictability to regulatory frameworks with her technical background and reliance on seasoned advisors.

Among some of the moderate-to-high risks for Mexico is public security and crime. Here again, Sheinbaum’s approach in working with US counterparts during her tenure in Mexico City has been applauded. Her cabinet picks for key positions thus far present an even gender distribution and draw from academia and her mayoral administration—in a bid to repeat the successes in crime-fighting she achieved during her years as mayor. These include veteran politicians Omar Garcia Harfuch for Security Minister, Marcelo Ebrard for Secretary of Economy and Alicia Barcena for Secretary of Foreign Affairs.

Mexico poised for economic growth

Over the near term, Mexico is expected to achieve a 2% growth rate—higher than its 20-year average.4 Although Mexico’s headline inflation accelerated beyond analyst expectations in June, its strong trend of domestic demand and high consumer confidence should also offer some economic momentum, in our opinion. For example, June auto sales were up 8.3% from a year earlier, according to government data.

It’s also important to recognize that Mexico is the second-highest receiver of remittances—transfers of money from migrants working abroad—in the world, behind only India. For the decade leading up to 2020, the percentage of households in Mexico that received remittances rose to 5.1% from 3.6% in 2010. Last year, remittances to Mexico notched a 7.6% increase, hitting a record US$63 billion, due to a strong US labor market.

Exhibit 1: Mexico Consumer Confidence

Exhibit 2: Mexico Real Gross Domestic Product (GDP) Forecast

Investors seeking exposure to Mexico’s market through broad emerging market indexes, like the MSCI Emerging Market (EM) Index, gain less than a 3% weighting to Mexico. And while China’s dominant share of the benchmark is lower now than in recent years, it still presents a 25% weighting, which may be more than investors want. In our opinion, single-country exchange-traded funds offer a compelling way for investors to layer targeted access to a country’s large- and mid-sized companies at a low cost.

As of the end of June, Mexico’s main benchmark stock index, the IPC, held a 33% weighting in the consumer staples sector. Materials and financial sector stocks make up the next biggest weighting at about 19% each.

As Mexico continues to play a larger role in global supply chains, investors should note corporate nearshoring progress as gauged by the country’s foreign direct investment (FDI) trends. At the end of 2023, Mexico ranked ninth among the world’s largest recipients of FDI, receiving investments of US$36 billion—about 2% more than in the prior year. Longer term, we believe nearshoring efforts, to diversify and improve the security of supply chains, remain a key tailwind for Mexico’s economy and markets.

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JPGR ETF investerar i amerikanska tillväxtaktier

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JPMorgan Active US Growth UCITS ETF - USD (acc) (JPGR ETF) med ISIN IE0005CH3U28, är en aktivt förvaltad ETF som investerar i amerikanska tillväxtaktier och strävar efter att generera en högre långsiktig avkastning än Russell 1000 Growth-index. Aktierna som ingår filtreras enligt ESG-kriterier (miljö, social och bolagsstyrning).

JPMorgan Active US Growth UCITS ETF – USD (acc) (JPGR ETF) med ISIN IE0005CH3U28, är en aktivt förvaltad ETF som investerar i amerikanska tillväxtaktier och strävar efter att generera en högre långsiktig avkastning än Russell 1000 Growth-index. Aktierna som ingår filtreras enligt ESG-kriterier (miljö, social och bolagsstyrning).

Den börshandlade fondens TER (total cost ratio) uppgår till 0,49 procent p.a. JPMorgan Active US Growth UCITS ETF USD (acc) är den billigaste ETF som följer JPMorgan Active US Growth-index. ETF:n replikerar det underliggande indexets prestanda genom full replikering (köper alla indexbeståndsdelar). Utdelningarna i ETFen ackumuleras och återinvesteras.

JPMorgan Active US Growth UCITS ETF USD (acc) är en mycket liten ETF med 4 miljoner euro under förvaltning. ETF lanserades den 18 januari 2024 och har sin hemvist i Irland.

Möjlighet

Erfaret portföljförvaltningsteam med i genomsnitt 30 års branscherfarenhet

Utnyttja de bästa idéerna från JPMorgans dedikerade tillväxtforskningsteam, förutom grundläggande insikter från över 20 amerikanska aktiekarriäranalytiker, alla med i genomsnitt 20+ års branscherfarenhet

Portfölj

Kombinerar två av JPMorgans beprövade aktiva amerikanska aktiestrategier (tillväxt med stora bolag och tillväxtfördelar), som kombineras för att leverera en diversifierad portfölj av amerikanska tillväxtaktier med underskattad tillväxtpotential över sektorer.

Resultat

Aktivt förvaltad investeringsstrategi som strävar efter att leverera en stilren tillväxtaktieportfölj med en viss grad av marknadskapitalflexibilitet

Investeringsmål

Delfonden strävar efter att uppnå en långsiktig avkastning som överstiger Russell 1000 Growth Index (Netto Total Return of 30% källskatt på utdelning) (”riktmärket”) genom att aktivt investera främst i en tillväxtstilsorienterad portfölj av amerikanska företag .

Handla JPGR ETF

JPMorgan Active US Growth UCITS ETF – USD (acc) (JPGR ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

BörsValutaKortnamn
Borsa ItalianaEURJGRO
London Stock ExchangeGBXJGOR
London Stock ExchangeUSDJGRO
SIX Swiss ExchangeUSDJGRO
XETRAEURJPGR

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