China’s re-opening continues to have legs in the capital markets with respect to investment opportunities. The second-largest economy has been ramping up its purchasing of commodities from Russia as of late, which could continue to feed commodity-focused exchange traded funds (ETFs).
One commodity China won’t be able to get as readily from Russia is wheat. It appears the importing of wheat has been mired in regulatory challenges.
“The Asian nation is on track to be the largest buyer of the food staple this season, and Russia is the biggest exporter,” a Bloomberg article said. “While Beijing said last year that it would allow imports from all parts of Russia, trade has been hampered by a slew of issues, including phytosanitary regulations and transport challenges.”
This is particularly challenging for China, who has been buying a lot of wheat as of late with imports growing by more than 60% compared to the previous year, according to the aforementioned Bloomberg article. That translates to about 6 million tons, with Russia accounting for just 30,000 tons.
Nonetheless, China’s re-opening has given commodities a helping hand in order to keep demand up even as supply increases. With central banks still trying to get inflation under control, commodities still present a hedge as well as portfolio diversification with assets uncorrelated to the broader market.
“Beijing’s purchases of energy and aluminum have soared as sanctions cut supplies to the West,” the Bloomberg article added.
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In addition to wheat, the (NBCM ) offers exposure to other commodities. It’s an ideal option for investors seeking broad-based commodities exposure while also incorporating active management.
Given that the commodities market can be a rocky and volatile affair, active management helps to smooth out price fluctuations. Portfolio managers can add or subtract from holdings to account for volatility or maximize returns.
Per its fund description, NBCM seeks total return by investing in diversified commodities using an active risk-weighted approach that seeks to minimize the effects of market volatility.
The fund has 28 commodity holdings, adding to the fund’s diversification. Corn, WTI crude, Brent crude, and gasoline round out the top five holdings (the top allocation of 12% goes to gold as of May 22).
For more news, information, and analysis, visit the Commodities Channel.