SEB fund sees value in commodities and currencies
LONDON (Reuters) - Investors should buy into heavily sold commodities and take positions in companies that will benefit from sharp currency movements, the manager of the SEB Asset Selection fund said.
Hans-Olov Bornemann, Stockholm-based manager of the 1.6 billion euro (1.1 billion pounds) fund, told Reuters the heavy sell-off in commodity prices means they are now attractively priced.
"Maybe now we're at a good entry point for a long term investment into commodities. When nobody wants to own commodities, that's a good point to come in," he said.
The price of copper dipped below $3,000 (2,100 pounds) per tonne late last year from a peak above $8,900 in July and is now trading at $3,330.
"It wasn't too long ago that we had a fantastic story about China; how the growth there would impact on the growth on the global economy and the shortage of raw materials," Bornemann said.
"That story people have forgotten about totally, and I think it's quite likely it's going to come back. And when it does we're going to see the same story being repeated again."
He added that a likely inflationary environment would make investment in tangible assets like commodities more attractive than those vulnerable to rising prices like bonds.
The fund, which uses a quantitative model and invests via futures across asset classes, "made a killing" in October last year on currencies by going long on the dollar and yen and short the pound, Bornemann said.
Sterling fell by 16.3 percent against the yen in the month of October.
The fund returned 19.1 percent for the year to the end of January, outperforming its benchmark in the Lipper Global sector by 32.9 percent, ranking it fifth of 736 funds.
The fund is long on the dollar again having briefly reversed this position.
"Currency developments tend to be underestimated by equity analysts and fund managers because when they come through, they come through in a big way," Bornemann said.
However the weakness of British and Swedish currencies has opened the door for opportunities investing in exporters based in these countries.
"I would be looking at companies which have a lot of production in countries like the UK and Sweden which have seen a weak currency."
SIGNS OF LIFE
Investors should look start to look for signs of life in the equity market this year, said Bornemann.
"There's going to be more bad news to come but all in all you want to get into the asset classes that have taken a major beating," he said.
Investors should be ready to react when the market seems to be more resilient to weak data.
"When the bad news is out and stocks don't react too negatively to that, it's a good sign," Bornemann said. "Maybe we've seen the trough in equities already."
"I think we're going to see some form of optimism coming out, there are some rescues in the financial sectors taking place so the banking sector is going to recover.
If that happens, people are going to get out of bonds and into equities which is going to push up their price."
(Editing by Raji Menon)
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