ICG Commodity Update – August 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

Crude oil capped a 4th monthly gain in August but has struggled to hold >$43 as increasing coronavirus infections raise concerns about the sustainability of the demand recovery. Following a year of unprecedented shocks, uncertainties over oil fundamentals has never been higher. Even at the latest OPEC+ meeting, the group announced a very high compliance rate of 97% but the statement, while positive in tone, offered also cautious guidance for the coming months. Indeed, the oil market flipped into undersupplied territory in July. However, the fragility of the oil market was also highlighted, along with the significant uncertainties associated with oil demand, and all members were called on to be vigilant in the coming months. Only China, that had a stronger-than-expected PMI with its early recovery and robust fiscal/monetary support resulted in an oil demand level above last year’s. On the equity side, the 2nd quarter of 2020 will go down in history as one of the worst for the energy industry. A collapse in demand, a collapse in drilling activity, and a collapse in oil prices took their toll without exception. Company results were a sea of red. However, investor expectations were low, so generally speaking energy stock prices were unfazed by dismal results. Rather, investors scrutinized how management teams are planning to position their companies to ensure greater resilience to future oil price cycles. Many companies also used the opportunity to reset their stated long-term energy price expectations, resulting in big asset write-downs. Finally, a couple of companies adjusted their dividends lower and made them more flexible. Therefore, we think the exceptional situation was used by many to lower the bar and this should accelerate the earnings recovery from here. Dedicated energy investors are increasingly comfortable with the positive rate of change thesis on oil, especially the supply side. The thesis is grounded in the upstream commitment to focus on debt reduction, return of incremental dollars to shareholders, and staying disciplined on re-investment. Finally, the announcement of Exxon Mobil’s exit from the DJI Index has been widely seen as emblematic of the decline in importance of Big Oil as the wider sector’s importance dwindles (now <2.5% of the S&P). The current disparity is probably generated by a combination of the cyclical/structural and thematic/sentiment. Nevertheless, investor legend Warren Buffett increased his investments in commodity related companies (Dominion Energy, Barrick Gold, Japan’s 5 biggest trading companies) this year showing increasing interest in the commodity sector that was out-of-favour for too long and may become a big opportunity going forward, he probably thinks. ICG is looking also for the companies with the strongest moat on different variables and offer an attractive well diversified portfolio of best-in-class companies that will strongly recover with the increasing focus of general investors in commodities.

 

Industrial Metals

In August, copper climbed to the highest since mid-2018 after data showed China’s recovery is on track. Chinese economic activity continued to rebound in August. Signs of tight supply and a stronger-than-expected rebound in metals usage in China have driven prices higher since mid-March. Also, there are concerns about a shortfall in global copper output, with inventories on the LME dropping to their lowest since 2005 by the end of August. Treatment fees for copper concentrate extended declines this year, dropping below $50 a ton, according to data from SMM, another signal for a tight market. According to analysts, industrial metals continue to strengthen in general amid continued USD weakness, as supply disruptions dominate the narrative along with a persistent decline in LME inventories. COVID-19-related disruptions and risks to output continue to impact major mining operations globally. Bolivia’s largest mine for example has suspended operations indefinitely for the second time this year due to an uptick in infections across the country. Bolivia is a major producer of zinc and silver. Further to that, investors have also started to buy raw materials that they think will fare well if the Federal Reserve’s efforts to revive the economy stoke inflation. Market measures of inflation expectations, such as inflation breakevens, have risen during the summer. A 2015 paper for the Yale International Center for Finance found commodities were positively correlated with inflation between 1959 and 2014. In contrast, stock and bond prices tended to post small declines when inflation accelerated. On the company side, Zambia said Glencore and First Quantum Minerals are willing to sell their combined 90% stake in Mopani Copper Mines to state-owned investment group. Zambia has had an uneasy relationship with mining investors, clashing with Glencore earlier this year over the company’s plan to mothball Mopani’s operations after the pandemic hit copper prices. Also, Warren Buffett’s Berkshire Hathaway lifted the veil on stakes in five major Japanese commodity traders that dominate the nation’s energy and raw materials industries. That move will intensify a focus on the outlook for raw materials just as prices hit the highest since 2018. Berkshire’s stakes amount to a little more than 5%, but Buffett made clear that they could be increased. While the quintet operate in different areas, they derive much of their revenue from energy, metals and other commodities, supplying resource-poor Japan with essentials.

 

Precious Metals

Precious metal prices pulled back recently as long-dated interest rates rebounded, hitting silver and gold in particular. By the end of the month, gold stood at close to USD 1970 per ounce, while silver closed august at USD 28.1 per ounce. However, analysts expect prices to recover to their previous highs as real US rates can go more negative, USD weakness should continue, and growth and policy uncertainties linger. On the company side, gold miners continue to find themselves in a perfect storm scenario of rising revenues and falling costs due to low oil prices and efficiency gains. Barrick and Newmont for example, two of the largest gold miners, use $65/barrel and $60/barrel respectively for budgeting and guidance purposes. This implies significant free cash flow generation and downside to future costs vs. guidance. Analysts expect the theme will persist through 2021 as low real interest rates drive investor support for the metal and mining managements continue to focus on cost discipline. Also, gold miners are widening their investment appeal as dividends are boosted. According to Gold Fields CEO, more generalist investors search for yield amid low bond-market returns. The sector, which once largely drew attention of specialist funds, is no attracting a broader base of investors who previously considered gold miners too leveraged and high-risk. A sign for that is Warren Buffett’s recent move with adding Barrick Gold to Berkshire Hathaway’s investment portfolio after shunning gold producers for years. The buy comes as a bit of a surprise, Buffett has been critical of gold, saying it isn’t as good of an investment as businesses, farms, and real estate because the metal is not productive. While the stake in Barrick Gold is small for Berkshire Hathaway, Buffett’s company is now one of the miner’s top shareholders with a stake of close to 21 million shares. In general, Berkshire’s investment in Barrick is considered good for the whole mining industry.

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ICG Systematic Equity Fund CH Update – August 2020

Das ICG Systematic Equity Fund CH Update ist ein monatlich erscheinender Kommentar über den Schweizer Markt und zum Fonds

 

  • Konjunkturzahlen, welche die tiefen Erwartungen der Marktteilnehmer zuweilen deutlich übertreffen, sowie die  Ankündigung von Nationalbanken, die geldpolitischen Zügel auf längere Sicht hin locker zu lassen, geben den Aktienbörsen auch im August Rückenwind
  • Angesichts der positiveren Signale aus der Realwirtschaft setzen Zykliker zur Aufholjagd an – Krisengewinner “Gesundheit” und “Nahrungsmittel” mit klarer Underperformance
  • Die anhaltende Flutung der Wirtschaft mit billigem Geld zementiert die Alternativlosigkeit von Aktienanlagen – klares Buy-Signal für Aktien aus fundamentaler Sicht
  • Technisches Bild liefert Aktienanlagen breite Unterstützung – Einziger Wertmutstropfen ist die zunehmende Zahl an Overbought-Indikatoren, die vor zu hohem Optimismus warnen
  • Maximale Aktienquote von 100% seit Anfang August
  • Stilmodelle präferieren Aktien mit hoher relative Stärke und nachhaltigen Wachstumsaussichten aus zyklischen Branchen
  • Übergewicht in Aktien aus dem Industriegüterbereich auf Kosten von defensiven Branchen
  • Mit einer Performance von 4.93% konnte der SPI im August dank einer guten Sektorenallokation und Titelselektion um 2.90% geschlagen werden
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ICG Commodity Update – July 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

Analysts see global oil supply falling by 1mbpd from 2Q into 3Q, driven by a drop of 0.5mbpd for both non-OPEC and OPEC production. The massive cut in capital expenditures by oil companies could lead to structural oil production declines in non-OPEC countries, such as the US, in 3Q 2020. Supply should start to increase again, albeit modestly, in 4Q versus 3Q, when production from OPEC and its allies is set to rise due to the tapering of the oil production cuts and as curtailed oil production in North America should be restored by then. Looking at demand, analysts continue to envision a gradual rebound through the year-end and into 2021. However, end-2020 demand could fall well short of end-2019 levels given that people will take some time to return to their old habits after covid related restrictions are lifted. The market sees oil demand down 3–4mbpd year over year in 4Q 2020, weighed down by less economic growth and changes in behavioural patterns (home working, fewer flights). Oil demand in the aviation sector will likely only recover more strongly when a vaccine has been developed. The increase in people driving to work or parks, instead of using public transport, should somewhat offset the demand crunch. The subdued supply, combined with the returning demand results in an expected undersupply of the oil market in 2H 2020 and 2021. Looking at companies, Exxon is pulling multiple levers to preserve its dividend. After posting a 2Q loss of $1.1 billion, marking the oil giant’s first back-to-back money-losing quarter in at least 36 years, the oil major said it has identified significant potential for additional reductions and is preparing deep spending as well as job cuts as it fights to preserve a 8% shareholder dividend, also, the company noted that capital spending in 2021 will be lower than this year’s. Exxon already slashed this year’s budget by 30% in April. European oil majors like France’s Total or Anglo-Dutch Shell scraped out small profits against expectations of losses in 2Q with the help of the trading units which can exploit market gyrations even when prices fall. Shell for example avoided its first quarterly loss in recent history after bumper earnings in its trading business. Adjusted earnings fell to $600 million from $3.5 billion a year ago, beating analysts’ forecasts of a $674 million loss. There was also M&A activity in the oil market last month, with Chevron to buy Noble for $5 billion in stock which marks the biggest oil deal since prices crashed. The oil price crash has decimated shares of many energy companies, making them attractive targets for those that have weathered the downturn and have the resources to buy. Chevron ended the first quarter with a cash pile of $8.5 billion after withdrawing a $33 billion bid for Anadarko last year and then being among the first big oil companies to slash spending during the downturn.

 

Industrial Metals

Copper prices have rallied 39% from their March lows, as the combination of contracting supply, and demand from China bouncing back strongly has provided the market with an attractive story to chase prices higher. Analysts expect the market balance at 0.4% of annual demand. While this points to a marginal surplus on a full-year basis, the market should be undersupplied in 2H 2020. The copper market should flip into a modest deficit in 2021 of 0.5%, from an initially expected surplus of 0.7% –  the structurally low inventory backdrop in copper and bullish investor sentiment require little to lift prices sharply. Copper stockpiles tracked by the London Metal Exchange saw the biggest monthly drop in July since 2009. Iron ore futures surged above $110 a ton amid expectations that strong demand in China and lower supplies will leave the market in a deficit this year. According to a survey by Shanghai Metals Market, blast-furnace utilization rates rose to over 90. In Brazil, supply is set to take a little longer to return with delayed court approvals and safety tests for Vale’s recovery from its dam collapse last year. The strong iron ore demand is also reflected in Australian mining giants Rio Tinto, Fortescue Metals and BHP Group’s reporting of record shipments to China. The companies have reported record earnings on the back of the iron ore shipments. Australia’s record iron ore exports to China, and a surge in shipments of coking and thermal coal, indicate trade in the key industrial ingredients has not suffered because of a diplomatic row between the two countries. The reporting season is in full swing. Analysts have been monitoring how miners adapt to the virus outbreak. In general, 2Q operational results have been better than expected with miners managing to maintain production, but they have reduced “non-essential” activities including waste stripping and underground development as well as extended maintenance schedules. According to analysts, most mines will be able to adapt, but the risk of disruption from Covid outbreaks or unplanned outages due to extended maintenance has increased. Start-up and ramp-up of projects are likely to be delayed and no new projects will be approved in 2020. It is believed that this will materially reduce what was expected to be healthy copper mine production growth of over 3% in 2021/22. Also, authorities in Chile are cracking down on water use by mines threatening future supply in the top copper-producing nation. By the end of July, Chile’s environmental agency charged BHP Group’s Escondida mine, the world’s largest, for allegedly drawing more water than allowed for almost 15 years in a move that could result in the loss of its permit, closure or a fine.

 

Precious Metals

Gold surged 11% in July, the biggest monthly gain since 2012, as investors weighed a weaker dollar and record low US real yields. The health crisis has prompted unprecedented amounts of stimulus being unleashed to shore up economies including lower rates, which are a boon for non-interest-yielding gold. Simmering geopolitical tensions are also boosting demand. According to analysts, gold positioning indicates that investors’ attitudes toward the metal have changed amid the public health crisis, economic turbulence, and extremely easy monetary policy actions which made gold a star asset in 2020, arguably appearing more popular than ever. Looking at silver, conditions remain favourable after its 33% surge in July. First, the Federal Reserve signalled that it will stay accommodative until economic activity is back to reasonable levels and the unemployment rate has dropped sufficiently. This monetary backdrop, coupled with a weaker USD, is driving higher ETF holdings in silver. Second, industrial application demand should improve in the coming months as economic activity resumes. Third, silver mine supply has been disrupted by the pandemic, mainly in Latin America which accounts for around 50% of global silver mine supply. Golds record run has burnished cash flows and driven a surge in shares of gold producers. The rally provides a renewed test of discipline for the miners after a similar climb a decade ago prompted a spate of inflated deals and overly optimistic investments. With costs contained even after pandemic-related closures, virtually all are churning out impressive cash. According to analysts, Barrick alone generated $438 million in free cash flow in the first three months of the year. If prices stay high, miners can capitalize on the current excitement by encouraging a little more risk to tackle the problem of stagnant production. Companies will need to invest $37 billion by 2025 to keep output at 2019, as Wood Mackenzie estimates.

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ICG Systematic Equity Fund CH Update – Juli 2020

Das ICG Systematic Equity Fund CH Update ist ein monatlich erscheinender Kommentar über den Schweizer Markt und zum Fonds

 

  • Nach den starken Kursanstiegen seit Mitte März warten die Anleger auf positive Impulse von der Konjunkturfront – Aktienmärkte in Europa konsolidieren
  • Schleppende konjunkturelle Erholung und die Furcht vor einer neuen Corona-Welle führen zu einer Fortsetzung der Outperformance von Wachstumsaktien aus dem IT-Bereich
  • Die anhaltende Flutung der Wirtschaft mit billigem Geld zementiert die Alternativlosigkeit von Aktienanlagen – klares Buy-Signal für Aktien aus fundamentaler Sicht
  • Technisches Bild verbessert sich im Verlaufe des Berichtsmonats auf breiter Front – maximale Aktienquote von 100% über weite Teile des Julis
  • Stilmodelle präferieren aggressive Aktien mit hoher relative Stärke, während auf Sektorenebene zyklische Branchen und Finanzwerte hervorstechen – defensive Branchen “Nahrungsmittel” und “Gesundheit” rutschen in den unattraktiven Bereich ab
  • Klares Übergewicht in Aktien aus dem Industriegüterbereich, welches während der letzten 4 Wochen kontinuierlich ausgebaut wurde
  • Mit einer Performance von 0.34% konnte der SPI im Juli deutlich geschlagen werden – gute Titelselektion kompensiert Verluste durch Futures-Absicherungen zu Beginn des Monats
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Finanzplanung & Treuhanddienstleistungen

Independent Capital Group AG, eine FINMA regulierte Finanzboutique und Multi Family Office, baut seine Dienstleistungen im Bereich Finanzplanung & Treuhand aus. Neu können auch Personen unabhängig von einem Family Office Mandat von den Finanzplanungs- und Treuhanddienstleistung der Independent Capital Group AG profitieren. Die langjährige Erfahrung und das Fachwissen, welches in diesem Bereich aufgebaut wurde, wird einem weiteren Publikum geöffnet. Das Dienstleistungsangebot wird in drei Teilbereiche gegliedert: Finanzplanung für Privatpersonen, Treuhanddienstleistungen für Privatpersonen und Treuhanddienstleistungen für Firmen und Stiftungen.

 

Zu den Dienstleistungen gehören:

 

Finanzplanung für Privatpersonen

  • Individuelle Situationsanalyse
  • Finanz-, Budget- & Vorsorgeplanung
  • Beratung bei Anlagen / Überwachung von Mandaten
  • Beratung bei Testamenten und Vorsorgeaufträgen

 

Treuhanddienstleistungen für Privatpersonen

  • Unterstützung bei diversen Steuerangelegenheiten
  • Beratung und Unterstützung bei Erbteilungen

 

Treuhanddienstleistungen für Firmen und Stiftungen

  • Finanzen und Personal
    • Führen der Buchhaltung
    • Controlling und Reporting
    • Personaladministration
  • Neugründungen, Umstrukturierungen, Liquidationen

 

«Sämtliche Dienstleistungen können auf die Bedürfnisse der Kunden angepasst werden. Unser oberstes Ziel ist es unseren Kunden Sicherheit zu geben und eine Entlastung zu bieten, damit sie sich auf die angenehmen Dinge des Lebens konzentrieren können.» erklärt Reto Michel, Leiter Family Office Services.

 

Die Independent Capital Group ist eine unabhängige Schweizer Finanzboutique mit Niederlassungen in Zürich und Basel. Sie untersteht der Aufsicht der Eidgenössischen Finanzmarktaufsicht FINMA. Gegründet 2005, bietet die Firma mit ihren rund 10 Mitarbeitenden diverse Dienstleistungen in den Bereichen Vermögensverwaltung und -administration an.

 

 

Kontakt

Reto Michel, CFA                                                                                                           Mirko Kräuchi

E-mail: rm@independent-capital.com                                                                      E-mail: mk@independent-capital.com

Phone: +41 (0)44 256 16 14                                                                                        Phone: +41 (0)44 256 16 13

Fax: +41 (0)44 256 16 26

 

Independent Capital Group AG

Waldmannstrasse 8

8001 Zurich / Switzerland

www.independent-capital.com

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ICG Commodity Update – June 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

The oil market has avoided Armageddon and oil demand is clearly recovering from the historic pandemic lows. The IEA and EIA both made significant upgrades to their 2Q20 demand estimates, with the IEA noting recoveries in China and India and upgrades to a number of OECD markets on improving mobility statistics. In the US, gasoline demand has increased the most, with individuals using their private cars to commute to work instead of using public transport. Therefore, the gap between demand and supply is narrowing, but inventories are still rising. However, from January to May, visible oil inventories increased less than expected. Voluntary production cuts by OPEC and its allies and involuntary cuts in North America triggered a steep drop in oil production in recent months. The US oil rig count has fallen to 188, the lowest since 2005. Most analysts expect oil markets to be in deficit from 2H20 on and throughout 2021. Some analysts even expect oil markets to fall into a large and sustained deficit past 2022. Most analyst agree that this crisis will have significant impact on global oil supply, potentially setting up a supply crunch even if demand was not even to reach 2019 level of 100Mb/d. Low oil prices have resulted in underinvestment in the exploration and development of new oil supply since the oil price downturn began in 2014. Reality shows that companies are moving away from investing in liquid hydrocarbon development and this has accelerated, exacerbated by extreme oil price volatility, climate change and ESG pressures. JP Morgan analysis reveals that cumulative underspend in oil projects, on track to reach $1tn by 2030, means the industry is at a point of no return with supply to peak at 102mboe/d in 2022. Companies’ capex is already constrained by greater shareholder pressure on free cash flows and total shareholder return focus. Oil & Gas companies are re-engineering their portfolios towards barrels that sit at the low end of the cost curve. But projects with a breakeven price that matches the current market price is simply insufficient. Even with project breakeven that have fallen quickly over the past 5 years, well over 50% of potential FIDs over the next 5 years are out of the money at crude prices of $50/bl. Additionally, for an ever increasing proportion of investors, holding the lowest-cost barrels is simply not enough, and the companies are facing calls to outline steps to show progress in reducing emissions and CO2 intensity. Further to that, applying a “low carbon” “low breakeven” overlay to global proven (1P) reserves, implies a near halving of the reserve life down to just 25 years, below that seen in 1980. To quote JP Morgan “The world is set to be short oil much sooner than it no longer needs oil”. We are persuaded that if oil prices do not rise sufficiently to stimulate additional supply, this risk will only be greater. However, the surviving Oil & Gas companies will certainly disproportionate profit from all this.

 

Industrial Metals

Base metals have recovered firmly since late March, with broad sector indexes up comfortably quarter to date. Especially copper, a proxy for global economic growth, up over 28% since its lows mid-march. Better-than-expected macroeconomic data across the globe and ongoing production challenges have tightened market balances, particularly in China. The lack of any significant rise in visible inventories during the first half of the year and drawdowns in some metals lately underscore the unusually tight market backdrop considering the contraction in global industrial production in 2Q. The quick policy support, both fiscal and monetary, that has been deployed as well as the pandemic’s impact on supply are speeding up the recovery of base metals prices way faster than analysts expected. Considering the more supportive backdrop for industrial metal prices so far, with industrial metal demand outside China likely to stage a comeback as well, the conditions are still bullish for the second half of the year. Looking closer at copper, the metal enjoyed its best quarter in nearly a decade, backed by a demand recovery in top consumer China just as the covid-19 pandemic threatens output in key producer Chile. The spread of the virus in Chile has an outsized impact on the copper market because the nation’s mine churn out a large chunk of global supply – over 28% in 2019 to be exact. Global copper holdings tracked by major exchanges in London, New York and Shanghai have shrunk more than 25% this quarter as China’s recovery spurred buyers to seek supplies. The overall volume is now lower than a year ago. A weakening dollar may also help push commodities prices higher and support the sector.

 

Looking at equities, the Stoxx 600 Basic Resources index may still be down 16% this year, but since its down in March, it’s been the best performing industry group in Europe, surging over 49%. Despite the past quarter re-rating, the overall basic resources sector is far from looking expensive relative to the broader market, with all metrics showing some discount, particularly on the price-to-book and the enterprise-value-to-ebitda ratios. According to Morgan Stanley, things are looking good for the mining sector. Analysts see opportunities especially in copper-related equities which are set to benefit from the free-cash-flow yields. Looking at the financial metrics mentioned above, the industrial metals champions fund has a price-to-book ratio of 1.9x, an enterprise-value-to-ebitda (2020E) of 5.4x and a free cash flow yield (2021E) of 9.3%.

 

Precious Metals

Gold has struggled to find a direction since rebounding in late March on the back of the Fed’s quantitative easing announcement as it remains torn between a large negative wealth shock to consumers and a surge in “fear” driven investment demand. Especially to emerging markets, the Covid shock has been substantial. India’s gold imports plunged by 99% in April/May, while Russia’s central bank stopped buying gold since the oil price collapse, for example. Offsetting this weakness has been an unprecedented surge in “safe haven”-demand. Year-to-date gold coin demand is up 30%, total weight of gold in ETF’s is up 20% year-on-year and there is a large amount latent gold demand. According to Goldman Sachs, ETFs capture around half of physical investment volume inflows implying that investment demand could be up as much as 1000 tonnes which more than offsets the 700 tonne fall in emerging market consumer demand. Gold investment demand tends to grow into the early stage of economic recovery, driven by continued debasement concerns and lower real rates. Also, analysts expect a material comeback from emerging market consumer demand boosted by easing of lockdowns and a weaker dollar.

 

Looking at equities, gold producers are expected to bounce back quickly from Covid-19 related setbacks and will see greater margins due to lower operating costs and higher gold prices. According to analysts, 2Q production will be lower but levels will normalize during the second half of the year. Gold miners will benefit from the sharp fall in prices of energy and materials as well as foreign currency depreciation and lower-for-longer interest rates which will lead to higher margins for the companies. The low fuel and energy prices could reduce operating costs by up to 5% according to Moody’s Investors Service. Despite being a cliché in the investment world, analysts are not anticipating that an elevated gold price will drive a return to the bad behaviours of the past. Growth for growth’s sake has been shunned by investors and management teams alike and therefore, costs are expected to remain relatively stable as the current environment aid in maintaining cost bases.

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ICG Systematic Equity Fund CH Update – Juni 2020

Das ICG Systematic Equity Fund CH Update ist ein monatlich erscheinender Kommentar über den Schweizer Markt und zum Fonds

 

  • Positives Momentum an den  Aktienbörsen schwächt sich im Juni ab – Blick der Anleger richtet sich vermehrt auf Konjunkturdaten, die noch nicht die erhoffte V-Erholung reflektieren
  • Extrem schnelle Sektor- und Stilrotationen – nachdem zu Beginn des Berichtsmonats die Jagd nach billig bewerteten Zyklikern ihre Fortsetzung nahm, schlägt das Pendel gegen Ende Juni wieder in Richtung Large Caps mit nachhaltigen Gewinnaussichten aus
  • Klares Buy-Signal für Aktien aus fundamentaler Sicht bleibt intakt – Tiefzinsumfeld führt zu Alternativlosigkeit von Aktien (“TINA”)
  • Technisches, marktpsychologisches Umfeld präsentiert sich gemischter – Tagesmodelle, welche während des Rebounds fast durchgehend positive Signale für Aktien generierten, zeigen zunehmende Schwäche
  • Aktienquote von 60%, nach Futures-Absicherungen
  • Stilmodelle ohne klare Signale: “Momentum” als einziger Stil, der immer noch klaren Rückenwind hat – Sektorenmodelle werden noch einmal zyklischer
  • Performance von 0.98% im Juni  auf Augenhöhe mit SPI – gute Titelselektion kann Verluste durch Absicherungen und Übergewichtung von Mid- und Small Caps ausgleichen
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ICG Commodity Update – May 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

Oil markets rebalancing continues to gather speed, driven by both supply and demand improvements which are running ahead of expectations. The oil market has avoided the nightmare scenario of filling storage and the Brent oil curve is no longer in super-contango. The 5-year Brent price to which equities had traded more closely before the price collapse rose to >$50/bl. Meanwhile, the gradual relaxation of restrictions on movement means we are seeing the early signs of gradual rebalancing of global oil markets. Mobility still remains limited for many citizens, but businesses are starting to reopen gradually and people are returning to work, which will provide a boost to oil demand. The number of people living under some form of confinement at the end of May will drop to ~2.8bn worldwide vs. 4 bn a month earlier. High frequency data show already an improving global oil demand picture. Tanker tracker data suggests record Chinese crude imports in May thanks, potentially, to the Chinese economy’s fast recovery. On the supply side, we are seeing massive cuts in output from countries outside the OPEC agreement and faster than expected. Oil rigs in the US have plunged to levels below the last crisis. According to WoodMac price-induced production shut-ins stand at 4.4mboe/d already. Significant investment reductions also results in the lowest project start-ups of the latest 20 years with only 1.6mboe/d new capacity additions this year vs. 5 years average of 4.4mboe/d. Further to that, OPEC is scheduled to meet next week and there is an emerging prospect of extending the current May/June 9.7mboe/d cut for a further two months. Therefore most analysts expect oil markets to move from oversupplied to undersupplied in 3Q 2020 and this for a while to reduce inventory levels. The flexibility of the Oil & Gas industry business model is heavily underestimated. Specifically, when capex is reduced the global supply chain becomes cheaper (service costs, equipment, etc.). The listed Oil & Gas upstream sector announced $180bn cost reductions so far ($128bn capex, $18bn opex, $32bn buybacks/dividends). The IEA expects investment contractions of $400bn over the whole energy industry, the largest decline ever. As production growth is slowed, decline rates moderate. Companies further reduce opex and at the end cost structures are once again slashed. As a result, companies are citing breakeven levels below expectations. According to our ICG data, the listed Oil & Gas universe will end 2020 with record low full cycle costs of $35/boe in 2020E vs. $45/boe in 2019. The reduced costs base will result in companies having a much stronger capital efficiency going forward. Several companies maintained their dividends highlighting their confidence in their ability to traverse the downturn. The sector is in much better shape than in previous crisis and the new future is overlooked. Valuations continue to be depressed and are in a historical context at all times lows.

 

Industrial Metals

World trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world according to the WTO. As change in economic growth and the change of industrial metals prices tend to go hand-in-hand, overall global primary demand in metals could fall by 5-6% in 2020 according to Goldman Sachs. As in the GFC of 2008-09, governments have again intervened with monetary and fiscal policy to counter the downturn – the G20 nations have committed more than $7 trillion of fiscal stimulus which will certainly contribute to a long sustaining period of metal demand growth after the lockdown. Therefore, economic activity is set to bounce in 2H 2020 and demand for industrial metals should recover as lockdown measures are eased. Also, global mine supply disruption has been an important offset to demand weakness during the COVID-19 outbreak as some of the world’s biggest mines were forced to halt production. Individual mines remain vulnerable to virus-related disruptions even though as nationwide restrictions in key mining countries are lifted. Looking at base metals inventories, the rate of inventory builds gives an indication of the balance between demand contraction vs supply disruption. Most analysts expect near-term that supply will recover faster than demand resulting in a build. However, so far, metal inventories have been on the rise across the sector but in line with seasonal norms. Overall, inventory levels at exchanges remain 10-50% below the 3-year average when adjusted for seasonal swings. Interestingly, in China inventories are declining, reflecting a strong recovery in activity/demand as restrictions ease. After the lockdown, activity in manufacturing is slowly building up – already 90% of Chinese manufacturing and construction activities has resumed by end-March.

 

On the company side, several input factors/prices for miners have collapsed e.g. oil, gas, LNG, coal and also FX has given away. As a result, the cost base for metal producers is substantially lower than it was at year end 2019. The flexibility of the mining industry’s’ business model is heavily underestimated. Specifically, when capex is reduced, the global supply chain becomes cheaper. With companies further reducing opex, cost structures are once again slashed which will result in breakeven levels below expectation and a much stronger capital efficiency. Analysts expect miners to generate a positive net income in 2020 even under the current low base metals prices with capex programs to stay low in coming years. They still generate free cash flows and most companies maintained their record high dividends, highlighting their confidence to traverse the downturn.

 

Precious Metals

The gold price was slightly up 2.6% during May. Gold continues to be a safe haven “currency” during the virus outbreak outperforming major currencies so far. The aggressive monetary stimulus of key central banks is supporting demand for real assets like gold as real interest rates are currently expected to remain close to zero through 2024. Investors continue to be hungry for gold as ETF inflows reached a record high and total known ETF gold holdings are close to 100 million ounces. Deflationary concerns may be an obstacle near-term but dovish central banks and eventually normalizing inflation expectations should ensure gold-friendly backdrop, anchoring real rates at very low levels. Meanwhile, some economists fret that the pandemic could lead to inflation. Virus-fighting measures choke off production and supply chains. At present the amount of goods and services available for purchase is tumbling. If supply interruptions translate into shortages in shops, then higher prices could follow. Massive stimulus programs are another potential source of inflation. However, inflationary effects are most likely to appear once the virus is truly beaten. Rehired workers could spend a high share of their incomes. The economic traumas of the early 21st century may push governments and central banks to prefer high economic growth and low unemployment to low and stable inflations, as happened after the Second World War. In future companies are willing to pay more to get local supply and some might even build up stockpiles of supplies. Gold shares fundamentals have changed significantly over the last few years. Many of them are generating record high free cash flows currently and the sector is expected to be debt free next year. Several input factors for miners have collapsed (e.g. oil, gas, FX). As a result, the cost base for metal producers is substantially lower than it was in 2019 and companies are citing breakeven levels below expectations. The reduced cost base will result in much stronger capital efficiency. The cash margin of the gold producers is currently at record high and the industry is currently more profitable than at any point in recent history. It seems likely that the market may start to look to these companies as good business, rather than just leveraged ways to invest in gold. M&A activity in the gold industry has increased significantly lately with several deals during May. Analysts say there is an abundance of gold companies that lack the scale to appear on the radar of big generalist investors and therefore the gold consolidation wave is set to continue.

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ICG Commodity Update – April 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

The drop in oil demand in April was likely the largest in history. However, the beginnings of a gradual reopen of European and US economies suggests that we are past the worst of the demand downturn. There has been a full recovery in road congestion for the work week days across major Chinese cities. Weekly preliminary oil demand estimates from the US confirm an improving demand trend. This trend in improving data is likely to continue going forward as more countries loosen their restrictions. At the same time, global oil supply is expected to contract significantly. First, as operating costs are not being covered for many oil fields, there are forced production shut-ins. At a Brent price of $25/bl, 10mbpd of oil production does not cover operating costs. Low prices have already triggered global production shut-ins worth 3.9mboe/d acc. to WoodMac. Also, OPEC+ have started to cut production. Nevertheless, the supply side has a time gap. Therefore inventories are increasing but going forward this increase may slow. Nevertheless, questions are being raised on how many more days of supply storage there are in the tanks if oversupply continues. Orbital estimates tanks can still accommodate >2 billion barrels worldwide. The global storage is 56% filled. Unlike energy equities, which price for anticipated fundamental changes, energy commodity prices reflect the state of the current market. Some regions are experiencing more oversupply than others. This was obvious in Cushing, Oklahoma, which is the NYMEX clearinghouse for the WTI oil contract. In a perfect storm, the May WTI futures contract fell to minus $37.6/bl on 20.04. Oil prices went negative for the first time on record and garnered substantial media attention. A lot of the storage got contracted during April. This doesn’t necessarily mean that the tanks got full at that time, but they were basically secured. The contango got steeper and steeper because you have to take delivery on the NYMEX exchange and there was no storage available to take the delivery. Some days before expiry of the May contract a lot of people were still long. Indeed, bullish investments in oil ETFs reached a historic high. It’s important to know, that Brent does not deliver into a landlocked, physical delivery point like WTI.

 

Nevertheless, oil prices at a multi-year low are pushing the rebalancing of the oil market into the most painful phase for producers. A wave of capex guidance updates indicates cuts of >30% for 2020. Capex cuts will reduce enhanced oil production recovery activity and will lead to a rise in decline rates in these fields. Underinvestment in the exploration and development of new oil supply could eventually lead to insufficient supply growth over the coming years. During 1Q reporting season companies are providing sobering forward outlooks. In an example of the strain facing energy companies, Shell cut its dividend for the first time since 1945. Despite this, energy equities outpaced the broad market over April.

 

Industrial Metals

Commodities ended the month with a mixed performance, even as April 2020 made history as the month that prices for WTI crude futures traded below zero for the first time ever. According to analysts, the bounce in copper prices reflect the earlier re-opening of the economy in China. This is not yet an all-clear, but China as well as Korea and Taiwan appear to be past the worst economic impacts from the COVID-19 pandemic. Looking closer at China, there are some strong recent data points in the metals sector. Analysts agree that China is on a recovery path even with the external shock from the global lockdown, but there is growing evidence that, on the back of old school fiscal measure, the metals intensity of this recovery is strong. While most are cautious that China alone can offset the drop in global demand we are seeing, in each of 2009, 2013, and 2016 Chinas pull on metals markets during a recovery cycle was much stronger than anticipated. Also, while in some cases inventory is still elevated, in steel and cement the market has seen aggressive draws over April, implying construction has recovered strongly as migrant workers returned. Indeed, latest data from Chinese consultancies shows rebar consumption over the last two April weeks the highest ever seen. Meanwhile, aluminum inventory is now back below levels seen in April last year and SHFE copper inventory back to levels into Chinese New Year. Prices remain well below the low end of the 2019 trading range though. Looking ahead, it’s reasonable to expect commodity prices to recoup some of their losses due to coronavirus-related demand destruction once the crisis is behind us. Both the global central bank accommodative policies and government fiscal stimulus may also work to spur economic growth and inflation, both of which can push commodity prices higher.

 

Looking at Equities, Glencore cut its 2020 capex guidance by about $1-$1.5 billion compared to original forecast and joins in mining industry’s rush to cut spending. The cuts are as a result of some projects deferrals, lower production and falling input costs. Glencore also lowers output goals for metals including zinc and nickel after operations were disrupted. Several mines around the world have been forced to slow or temporarily close as countries wrestle to contain the spread of the virus. Other producers including BHP Group and Rio Tinto have also announced plans to review or lower capital spending, putting the brakes on development projects as they seek to maximize cash and protect balance sheets. There is growing concern that the spread could lead to disruption at key assets that drive profits.

 

Precious Metals

Gold prices hit fresh record highs twice in April. The expansion of the monetary base by the Fed combined with low interest rates and amplified inflation creates a very constructive environment for gold. The Federal Reserve is in the process of creating an unprecedented amount of new money to deal with the fallout from the epidemic. The Fed has announced several multi-trillion dollar monetary programs designed to provide massive liquidity to markets to prevent the economy from collapsing. The easing of the lockdowns in some parts of the world as well as hopes for treatments dented the rise a bit by the end of the month. Some of the world’s largest hedge funds are raising their bets on gold, forecasting that central banks’ responses to the coronavirus crisis will lead to devaluations of major currencies. They are wagering that moves to loosen monetary policy and even directly finance government spending, intended to limit the economic damage from the virus, will debase fiat currencies and provide a further boost to gold, according to the financial times. New York-based Elliott, which manages about $40bn in assets, even told its investors that gold was one of the most undervalued assets available and that its fair value was multiples of its current price. Looking at platinum, there is currently 73% of world supply disrupted due to the lockdown in South Africa – which is the world’s largest platinum supplier by country. Same goes for Palladium with 38% of supply out of markets.

 

Looking at gold equities, analysts expect gold miners to profit from the rebalance of the MSCI Standard Index in May as some gold equities will go into several indices which will spur buying. There was also M&A activity in the precious metals space with Silvercorp Metals acquiring Guyana Goldfields. Silvercorp said the acquisition will create a diversified precious metals producer with two profitable underground silver mining operations in China and a gold mining operation in Guyana. Also, a company jointly owned by Barrick Gold and China’s Zijin Mining Group got a reject on its application to extend the lease on the Porgera Gold mine in Papua New Guinea. The special mining lease expired last year and discussions are underway since 2017. The country wants to start negotiations about a transitional period, after which time the state will enter into owning and operating the mine. Barrick and its Chinese partner will pursue all legal avenues to challenge the Government’s decision. Operations are currently suspended.

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Dienstleistungen für wohltätige Stiftungen

Independent Capital Group AG, eine FINMA regulierte Finanzboutique und Multi Family Office, welche sich auf die Betreuung von wohltätigen Stiftungen spezialisiert hat, baut ihr Angebot für wohltätige Stiftungen aus. Das Team betreut Stiftungen, wie zum Beispiel die MBA for Women Foundation und die Stiftung Hopp-la, in verschiedensten Bereichen. Sei es bei der Errichtung der Stiftung und deren Organisation, bei der Geschäftsführung und Verwaltung des Vermögens sowie bei der Berichterstattung des Jahresberichtes und der Rechenschaftsablage zu Handen der Stiftungsaufsicht. Das intern bestehende Fachwissen und die langjährige Erfahrung ermöglicht es eine effiziente und kostengünstige Plattform für Stiftung anzubieten.

 

Zu den Dienstleistungen gehören:

 

Errichtung von gemeinnützigen Stiftungen

  • Erstellen der nötigen Dokumente, Vorprüfung bei der Stiftungsaufsicht
  • Unterstellung bei der Stiftungsaufsicht und Erlangung der Steuerbefreiung

Unterstützung der Geschäftsführung

  • Bearbeitung von Anfragen an die Stiftung
  • Koordination von Spenden und Vergabungen

Stiftungsorganisation

  • Stiftungssitz und Sekretariat für den Stiftungsrat
  • Finanzen und Personal
    • Zahlungsverkehr
    • Führen der Buchhaltung
    • Controlling und Reporting
    • Cashflow-Planung
    • Personaladministration
  • Erstellung eines Jahresberichtes und des jährlichen Reportings an die Stiftungsaufsicht

Verwaltung des Stiftungsvermögens

  • Beratung und Unterstützung bei der Vermögensverwaltung
  • Überwachung/Kontrolle der externen Vermögensverwalter
  • Berichterstattung an den Stiftungsrat

 

«Sämtliche Dienstleistungen können auf die Bedürfnisse der Kunden angepasst werden. Der Anspruch liegt darin eine neue Stiftung bzw. eine bestehende Organisation zu entlasten und sie möglichst effizient, professionell sowie kostengünstig aufzustellen, damit die Ressourcen der Stiftung zielgerichtet für ihren vorbestimmten Zweck verwendet werden können.» erklärt Reto Michel, Leiter Family Office Services.

 

 

Die Independent Capital Group ist eine unabhängige Schweizer Finanzboutique mit Niederlassungen in Zürich und Basel. Sie untersteht der Aufsicht der Eidgenössischen Finanzmarktaufsicht FINMA. Gegründet 2005, bietet die Firma mit ihren rund 15 Mitarbeitenden diverse Dienstleistungen in den Bereichen Vermögensverwaltung und Administration an.

 

Kontakt

Reto Michel, CFA                                                                               Mirko Kräuchi

rm@independent-capital.com                                                        mk@independent-capital.com

+41 (0)44 256 16 14                                                                           +41 (0)44 256 16 13

 

Independent Capital Group AG

Waldmannstrasse 8

8001 Zurich / Switzerland

 

 

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