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Commodities waiting take centre stage, Singapore incorporation company reports
Commodities waiting take centre stage, Singapore incorporation company reports
Undervalued stocks of commodity producers may be in for a re-rating if Singapore’s economic growth remains stable, says Mr James Nuben of AsiaBiz Services.
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Undervalued stocks of commodity producers may be in for a re-rating if Singapore’s economic growth remains stable, says Mr James Nuben of AsiaBiz Services.
Over the past few months, there have been concerns over the health of the global economy affecting resources stocks. The market is waiting anxiously to see if China can sustain their economic growth as the country makes up for 30 to 50 per cent of the commodity demand. “Growth, while it will be quiet, is likely to keep going,” said Mr Nuben.
AsiaBiz specializes in Singapore company incorporation services and the application of work visas for foreign individuals, investors, and entrepreneurs. Commodity experts expect gold prices to remain between US$1,150 and US$1,250 per ounce in the near term. They also think gold performance will stay healthy for another three to five years.
Miss Catherine Raw of BlackRock Natural Resources says: “We need the macro picture to improve for a relative re-rating to occur. A slowing of economic growth is already factored into forecasts. We think we'll see slower growth - but still expansionary. Given that, valuations are predicting something more pessimistic.”
A Barclays’ commentary on the commodities market written in June agrees with Miss Raw. The commentary stated that while commodity fundamentals grew stronger, prices have been wavering over unstable financial markets that were affected by European sovereign risks. However, Barclays said that commodity price falls are likely to pass, adding that their macro-economists believe that risks to recovery are at best relatively mild. Barclays expects prices to remain choppy for some time.
Mr Nuben thinks that even though commodity prices have rebounded, they are still far from peaking. On a good note, producers’ have strong balance sheets and cash flows. “The strength of the mining companies is in their balance sheets,” agrees Ms Raw.
Companies’ net debt positions have reversed into net cash, raising the potential of higher dividend payouts. Companies have also become more attractive as M&A targets, added Miss Raw. “With valuations so low today, it's cheaper to buy a producer than to build. That's a potential driver for valuations over the next 2-12 months.” Commodities funds are largely focused on copper due to the high demand and low supply. China is seen to be a big source of copper demand.
Boosted by a spike in risk aversion, gold hit a peak of US$ 1,250 earlier this year. “Gold should continue to do well for another 3-5 years. What is bad would be the strengthening of a currency because the outlook for that currency has improved,” said Miss Raw.
Between 2003 and 2006, the US dollar showed an almost perfect negative correlation with gold. “The market for this highly-sought mineral would weaken if US dollar steadily grows stronger, or stock markets begin to stabilize,” added Mr Nuben. Factors such as the Greek debt crisis, doubts over the euro, as well as the Australian mining tax have all contributed to uncertainty in the commodities market this year. However, these problems have been toned down, but markets are still waiting to price in a more muted tax impact.
Since 1998, AsiaBiz Services has been providing highly professional Singapore company incorporation services, both in attractive standard packages as well as customized services. Online incorporation being a hallmark service, other services of AsiaBiz include Offshore Incorporation, Singapore EntrePass /Employment Pass/Personalized work Pass application, GST Registration, Accounting Services, Tax Planning & Consulting, and Business Plan Drafting.
Visit http://www.asiabizservices.com.com for more information about this topic and the services we provide for company incorporation in Singapore.
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AsiaBiz Services has been providing highly professional Singapore company incorporation services, both in attractive standard packages as well as customised services. Online incorporation being a hallmark service, other services of AsiaBiz include Offshore Incorporation, Singapore EntrePass /Employment Pass/Personalised work Pass application, GST Registration, Accounting Services, Tax Planning & Consulting, and Business Plan Drafting.
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