Interesting to note that Malaysian economists believe that a lot of the speculative funds are going into commodities, leaving many hedge funds hanging dry.
My question is that what happens next when demand and supply of commodities become flat. I believe many countries (especially African countries) are opening lots of mine. China is also prospecting and opening many new mines in Xinjiang and Tibet. And countries like Australia and Brazil are addicted to extract more minerals to keep up with the lifestyles and increasing expenditures. I can also see Chinese goverment building their own reserves stocks, to fight against speculators.
In time of inflation, hoarding becomes widespread. This is actually bad, as many poorer people and countries will suffer due to artificial shortage which tend to increase prices even more. Why few people are speaking out against such behaviours ? Is it because of the interest of poor countries and people are not in the agenda, unless accompanied by heart tugging Western Charities concerts.
Saturday March 8, 2008
By LOONG TSE MIN
US hedge funds have become the latest casualty of subprime woes as trading in Carlyle Group’s mortgage-bond fund, Carlyle Capital, was suspended in Amsterdam after creditors forced the sale of some assets.
Carlyle Capital Corp said in a statement that lenders who issued default notices had liquidated some residential mortgage-backed securities held by the fund and might sell more as talks continued.
While subprime woes had previously affected structured investment vehicles based on subprime lending instruments, the credit crunch had now spread to hedge funds and US monoline insurers, said RAM Holdings Bhd chief economist Dr Yeah Kim Leng. “The banks that had lent to hedge funds are now calling back their money. It’s a kind of credit crunch that seems to be intensifying,” he told StarBiz.
On falling global markets on US recession fears, Aseambankers economist Saifuddin Morat felt that a recession in the US had been forecast since the middle of last year but “the market has not been efficient enough to discount for a recession”. “It is only unwinding now, just as the subprime mortgage lending problem came to light at about the same time last year but it is only now that banks are making losses,” he said.
Saifuddin said another reason for falling equity markets could be a shifting of funds and investors into commodities such as crude oil.
Crude oil reached a record US$105.97 a barrel for April delivery in New York trade on Thursday but fell 95 US cents to US$104.52 yesterday. Brent crude for April settlement stood at US$101.63 in London at 5pm Malaysian time.
Yeah said the recent record gains in commodities such as crude oil, crude palm oil and gold were also largely due to speculation.
“The fundamentals of these commodities (such as supply and demand) are not so volatile and recent rises are largely due to sentiment as well as fund inflows.”
Yeah believes that global investment funds “which still have money” were looking at alternative investments in developing markets and particularly, commodities.
“There’s a shift from one asset class to another,” he said, adding that the falling US dollar was also part of the reason funds were moving away from equities to commodities.
The recent spike in prices of commodities as well as industrial metals like nickel was due to an “almost immediate switch to commodities in reaction to the decline in the dollar,” Yeah said.