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Investec's Cheveley: China will reassert itself in 2013
by Matthew Goodburn on Dec 19, 2012 at 12:14
Investec Enhanced Natural Resources managers George Cheveley and Bradley George have been increasing their net market exposure to commodities as they see positive macro signs for equities in gold, iron ore and the energy majors over the next few months.
Cheveley told Citywire Global that he expected an upturn in meaningful Chinese growth in the first two quarters of next year, which would benefit iron ore companies in particular, and said the large diversified miners such as core holdings BHP and Rio Tinto would also be able to surprise the market with better than expected cost savings.
'We expect to see Chinese growth reaccelerate. We expect to see many commodity prices holding or going higher and see many companies particularly in basic and bulk materials cutting costs. BHP and Rio should be able to do that, and also a number of junior mining companies.'
Adding to Gazprom and BG Group
After a difficult 12 months for the fund and commodities in general amid fears of a China-led growth slowdown, Cheveley told Citywire that many investors were now under exposed to the sector and he expects interest in commodities to increase once again in 2013.
By the end of November, Cheveley said net market exposure to commodities had risen to around 70% of the £200 million portfolio, from 65% at the end of October and 45% at the start of 2012.
Around half of the exposure is to the energy sector, with positions in US oil services groups such as Baker Hughes, Weatherford and Precision Drilling added, while over the past month, exposure to Russian state giant Gazprom and UK-listed BG Group has also been increased.
The pair expect a seasonal rise in the price of energy in the Northern Hemisphere and a wave of corporate activity among the major energy companies as they look to maintain their growth targets, but they also believe there has been a shift away from what has been mainly a US - focused energy market.
Cheveley told Citywire Global: 'We have added some Gazprom and BG after its fall from grace as we anticipate some tightness in the European market as Japan has been buying up much of the Liquid Natural Gas Supply. These companies are best placed to take advantage of any spikes in supply as both are global players, and gas as a theme has now moved towards a more global focus.'
The fund's gold position has been maintained at around 10%, with 7.5% in gold equities and a further 2.5% in ETFS Physical Gold.
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