x Abu Dhabi, UAEFriday 19 January 2018

Copper takes on shine for investors

A recent dip in the copper price could be a good entry point for investment in what analysts say might be one of the best performers in the commodities market.

A recent dip in copper prices could provide a good entry point for investors, as analysts say the metal may be one of the top performers among commodities.

Copper has gained 22 per cent this year but has dipped 6 per cent in the past two weeks. The fundamentals remain strong, said Daniel Brebner, an analyst based in London at Deutsche Bank.

Supply growth has been widely contained and it is estimated there will be a deficit of 300,000 tonnes of the metal next year. Higher demand from growth in the industrial sector, particularly from China, is also expected to help lift prices. "Consensus has been quite positive," Mr Brebner said.

Copper should also benefit from the introduction of exchange-traded funds (ETFs) to the public market, he said.

Last month, JP Morgan officially filed a preliminary prospectus with the US Securities and Exchange Commission for a copper ETF to list on the New York Stock Exchange. According to the filing, JP Morgan will link up with ETF Securities to offer clients exposure to copper. The increased trading could serve to artificially lift the price in the short term.

For the ETF, JP Morgan will hold the metal in physical form and shares of the fund will be priced to correspond to the value of one one-hundredth of a tonne of copper. After JP Morgan's plan was publicly introduced, the BlackRock asset management company said it would design a similar ETF.

Mr Brebner expects the first publicly tradable copper ETF to be introduced next month and the others early next year.

Although commodity prices fell last week as a result of the EU bailout for Ireland and tensions continuing between North and South Korea, Mr Brebner believes lingering turmoil will drive investors to commodities as a less risky alternative to equities.

"There is political risk out there globally and Korea is something investors will be watching and worrying about," he said.