The Move To Commodity Trading

By William McWilliams

Commodity trading is remarkable, especifically because it is possible to make large amounts of money in a short period of time. It is simply a means of trading any physical material that is exchangeable with another like item that investors buy or sell. Commodity trading is basically speculation on the future price actions of a basic raw material. Commodity trading is the one area of the financial markets where any individual with persistence, money to risk, and discipline can be extremely successful. Commodity Trading is also a way to make money fast, but carries considerable risk to your principal. Commodity trading is too risky to try without some sort of trading system or strategy.

Traders enter commodity trading with a view to making big money. Contrary to what many traders say, the mechanics of trading is uncomplicated. You can gain a thorough understanding of how the commodity markets work just by reading a basic guide to Commodity Trading. It should include how to place a trade, contract sizes, margin requirements, and more useful information for newbie traders. Short-term trading is how the majority of traders and would-be traders take part in the markets. Discover what professional commodity traders do that separates them from the losing masses. You will also want to find a firm that offers commodity traders low commissions, quick executions, charts and free quotes.

You should be advised that commodities trading is not for everybody, and if you decide to open a commodity trading account be sure you understand all the risks involved. You may make all of your own trading decisions. Or, for individuals who prefer to leave trading up to a professional commodity trading advisor, a managed account may be the better choice for them. Discuss your commodities trading plan with a commodity broker.

Commodity trading is one of the few remaining level playing fields available to traders. Commodity trading is certainly not for everyone because it can be one of the most volatile markets you can trade. If you are thinking about trading on the futures markets, please do your research and read a commodities trading guide to see if commodity trading is for you.

For more information on commodity trading visit Commodity Trading Strategy Be sure to sign up for their free commodity trading guide at www.commoditytradingstrategy.com

Ways to Invest for the Good Life

Low interest rates prompt a new approach to investing

So, who is not wounded by the low deposit rates in Thailand? Whether you are a millionaire, a farmer, an office worker, a merchant, a factory worker or a college student, chances are you have been very unhappy with the interests received from your bank deposits.

Most of us have been accustomed to earning a double-digit rate for the past twenty years. Today, the current 2-4% rates, hardly cover, if at all, the monthly bills. This has created problems for us who know no other way of earning income aside from the bank deposits. Even worse, many of us still believe that the high deposit rates will return as the economy improves. In my opinion, that day will never come – not in the next five years.

So the question is how can we protect, if not create more of, our wealth in Thailand?

The answer is to learn and understand the different investment products besides bank deposits, and to mix them in the appropriate proportion to give the most optimal outcome. The latter part is very important, and referred to as “asset allocation” in the investment world.

In Thailand, there are limited investment products. You are probably aware of bank deposits, government bonds, corporate bonds, fixed income funds, equity funds and stocks. (Notice the order – they range from lowest to highest risk level.) However, the most important, depending on your investor type, is the mixture of products into an investment portfolio that will enhance your total return whilst minimizing risks. To illustrate, I would like to give you some examples of the following investor types:

Retirees

Your investment goals should be to preserve the principal and receive a stable stream of income. You can only achieve this by investing in lower-risk products like bank deposits, government bonds, high-grade corporate bonds and fixed income funds. Under the current market rates, I would recommend the following allocation:

Bank deposits: 15%
Government bonds: 25%
High-grade corporate bonds: 20%
Fixed income funds: 40%

Newly graduates

As you are at the start of your working career, you probably have limited funds to invest. However, you must

be planning about your being financially independent and, someday, a marriage. In this case, you can probably assume higher risks in pursuit of higher gains in the medium to long term. My recommended portfolio is then:

Bank deposits: 10%
Fixed income funds: 40%
Equity funds: 50%

And as you gain more experience with the stock market, you can possibly reduce the portion in the equity funds and go directly to the stock market yourself. Of course, this will enhance your potential gain and increase your risks.

Managers

While you are between 35 and 50 years old, your concerns should be how you can support your children’s education and how you can retire comfortably. Your risk profile should then be in the middle: you can assume some high risks for long-term performance but you also need current income. Your portfolio should then be:

Bank deposits: 10%
High-grade corporate bonds: 20%
Fixed income funds: 30%
Equity funds: 30%
Stocks: 10%

Please note that the above allocation percentages are just indicative and should be changed according to different market conditions. They should be “tailor-made” to suit your exact financial needs, goals, risk profile and other constraints. If possible, you should consult your financial adviser to decide on your most appropriate asset allocation.

To summarize, it is prudent for you as investors/depositors in Thailand to diversify your money into other investment products in order to protect your wealth from further deterioration. Long gone are the days when you only rely on interests from your bank deposits to support expenses. To ensure you will enjoy ‘the good life’, you must plan your asset allocation well.

Reprinted with modification from 'Money Matters', a weekly column written by Reungvit Nandhabiwat, former managing director of AYF, for the Bangkok Post.
August 16, 2000

Weekly Market View (July 21-25, 2008)

Economic
US: Treasury Secretary Henry Paulson said a strong dollar is important to US interests and it would support long-term economic growth. Philadelphia Federal Reserve President Charles Plosser commented that despite weak labour and financial markets, the Fed might start raising interest rates to detect rising problem from rising inflation. However, in the Fed’s Beige Book, there is no signal for a rate hike in the next FOMC meeting.

Europe: Industrial orders declined more than expected by 4.4% YoY in May. In Germany, the Finance Minister said the economic growth declined considerably in 2Q08, but it would not completely grind to a halt. Recent Ifo business survey results showed that German business confidence dropped from 101.2 in June to 97.5 in July.

UK: The economy grew by 1.6% in 2Q08, the lowest level in 3 years, and decelerated from 2.3% in 1Q08. Retail sales rose 2.2% YoY in June, slowed from a 7.9% YoY in a month earlier.

Japan: Core inflation rose at the fastest pace at 1.9% in June as expected. Exports fall 1.7% in June, the first negative growth in the last 5 years. Analysts noted this might be a signal that weak US economy had began to impact the others. Market expected the BoJ would keep its policy rate at 0.5% until the end of this year.

Thailand: The BoT Deputy Governor Atchana Waiquamdee said that Thai economic growth in the second half would slow from the first half, but the BoT put more focus on economic stability rather than economic growth. She admitted that the interest rates are on an upward trend. The Fiscal Policy Office expected a 5.9% growth in 1H08, where 1Q08 and 2Q08 grew by 6.0% and 5.8% respectively. It expected the Thai economy would be expanded by 5.3 – 5.5% in the third and fourth quarter of this year, which would produce a growth of 5 – 6% for this year. The Finance Minister said that the government would release another economic stimulus package in the next 1 – 2 months. On the trade balance account, the Ministry of Commerce reported that exports growth hit a new record high at 27.4% in June, total value of USD16.27bn, as exports to Asian countries and China were robust. Imports rose 30.7%, total value of USD15.64bn. A trade surplus was reported at USD628mn. For the first 6 moths of this year, exports rose by 23.1% or value of USD87.21bn, imports increased 33.6% or value of USD88.28bn, generated a trade deficit of USD1.1bn.


Fixed Income Market
Local fuel price dropped as crude price lowered and government excise tax subsidy plan help easing July inflation expectation. The inflation figures are scheduled to be announced next week. Consequently, government bond yield dipped around 10 bp across the curve this week.

AYF expects the BOT to increase RP not more than 50 bp toward end of 2008 while yield curve already priced in another 2 hikes. Thus, the downside on bond price is less than few months before. AYF recommended diversifying part of investment to medium term bond (1 - 3 years maturity).


Equity Market
The week started on bullish tone, shot up nearly 5% WoW at peak, as credit market concern eased after results from major US financials were not as bad as feared and inflation concern receded with losses in energy commodities after USD strengthening and Hurricane worries fading. However, the optimism was short-lived, weekly gains were partly wiped out by week-end on US housing slump, ongoing street protests, and political uncertainties. Among the top gainers this week were banks and property developers on strong 2Q08 results and lower fuel prices.

Weekly Market View (July 14 - 18, 2008)

Economic
US: The Federal Reserve Chairman Ben Bernanke told the senate banking committee and the House of Representatives panel that tight credit, weak housing market, and soaring oil prices were vital factors threaten the US economic stability. He insisted that restoring financial market stability was his top priority. Market changed its expectation on interest rate from a hike to a hold at 2.0% after Bernanke’s testimony. The statement also dragged oil prices down sharply, as investors concerned that a slowdown in the US economy might bring demand for oil down.

Europe: Euro zone inflation rose 4.0% in June, the highest level since the economic union was settled, as food and energy prices soared. Germany producer price index (PPI) rose 6.7% YoY in the same month, hit the highest level in 26 years. Excluding oil, which rose 17.9% YoY, Germany PPI rose 3.0%.

UK: Producer Price Index rose 10%, while production costs surged 30% in June. Inflation rose 3.8% YoY in June compared to 3.3% YoY in May. Analysts believed that rising inflation would force the BoE to hike rate.

Japan: The BoJ kept its policy rate unchanged at 0.5% as expected and revised GDP for the fiscal year ended March 2009 down from 1.5% to 1.2%.

China: China economy grew by 10.1% in 2Q08, slowed from 10.6% in 1Q08, led by slower exports and the PBoC’s tightening policies. However, China growth remained robust, while inflation rose 7.1% in June. Analysts expected the central bank would keep its tightening stance for a while in order to keep inflation in check and avoid economic overheating.

Thailand: The Monetary Policy Committee (MPC) tried to curb inflation by raising the benchmark interest rate by 0.25% as expected. The MPC’s statement showed that the policymakers expected that rising oil prices would result in higher inflation, and the BoT would act as needed. Top management of large Thai commercial banks commented that current BoT’s action would not have much affect on loan growth. The Center for Economic and Business Forecasting, University of the Thai Chamber of Commerce reported that higher living costs, political instability, and depreciation of Thai baht dragged Thai consumer confidence down to 70.8 in June from 71.8 in May.

Fixed Income Market
Bank of Thailand raised RP 1 day interest rate by 0.25% with hawkish tone of statement. Most of the Asian countries are forced to hike rate in respond to the inflationary pressure. However, government bond yield dropped for 10 - 30 bps during the week led by sell-on-fact momentum and sharp dropped of crude oil price by ~ 10 USD. We believe that Thai yield curve still facing upward pressure by worsening inflation in 3Q08 and new supply to be announced in late September.

Equity Market
Market has plunged another 9% this week to lowest level in 15-month as US financial jitters over troubling mortgage backers span the globe. Risk aversion is mounting on concerns of widening credit-market losses and slowing global growth will hurt earnings. Growing unease about politics at home i.e. efforts to amend constitution also exacerbated selling pressure. Consumer confidence in June also dropped to lowest level of this year, while BoT decided to hike benchmark rate by 25bps to 3.50% to catch up with inflation as widely expected. Government has unveiled relief measures to help alleviate soaring living costs, but the handouts weren’t enough to overcome bearish sentiment. Oil prices slumped more than $10 a barrel from lifetime high as Fed Chief testified that US economy is facing significant risks to growth, which triggered fear of dampening oil demand and, therefore, a broad sell-off in energy counters.

The information contained herein is AYF's opinion at the time of its publication and subject to change without prior notice.

credit: www.ayfund.com

Weekly Market View (July 7- 11, 2008)

Economic

US: Kansas City Federal Reserve President Thomas Hoenig commented that the Fed should raise its policy rate to neutral level to prevent high inflation taking root.

Europe: Eurostat revised euro zone1Q08 GDP down to 0.7% QoQ (2.1% YoY) from 0.8% QoQ (2.2% YoY) in earlier report. On the Germany economy, German Finance Minister Peer Steinbrueck said that rising global inflation might hit domestic consumption in Germany. He agreed with the ECB that it should focus on preventing inflation problem. He believed that raising policy rate would have a small affect on the Germany economy.

UK: The BoE kept its policy rate unchanged at 5.0% as expected. Manufacturing output declined 0.8% MoM in May, the sharpest declining since December 2005, which might imply that UK economy had been slowing down. Moreover, UK consumer confidence dropped for the 6th consecutive month. There was no sign that consumers would slow their spending, however.

Japan: The BoJ governor said that profit margin of Japanese companies had been decreasing as oil and raw material prices rose, which pushed wholesales price index to its 27 years high at 5.6% in June. Consumer confidence dropped to 32.3 in 2Q08, the lowest level since the survey began in 1982. However, analysts expected the BoJ would keep its policy rate on hold at 0.5% through out this year.

China: Government source said that inflation rose by 7.1% in June, dropped from 7.7% in May.

Thailand: Reuters’ poll reported that market expected the MPC to raise its policy rate by 0.25% in the 16th July meeting to curb inflation. However, analysts did not expect an aggressive rate hike as it might hurt economic growth.

Fixed Income Market
During this week, Thai government bond yield was volatile and ended with declining by 5- 28 bps across the curve. These were led by a negative outlook on the US economy from deterioration of US banking crisis after Freddie Mac and Fannie Mae may face troublesome of huge capital raising ability. The second Iran's missile tests and supply concerns from Nigeria and Brazil push oil price back above 140 USD/barrel. The next MPC meeting will be held on 16 July 08, 11 out of 12 analysts expect 1-day repo to shift by 0.25%.

Equity Market
Market took a beating to lowest level of this year early in the week as specter of political instability was heightened after the Constitutional Court ruled that a Joint Communique Thai Foreign Minister signed with Cambodia over Preah Vihear Temple is unconstitutional and a key executive of People Power Party found guilty over electoral fraud by Supreme Court. Blue chippers in bank property and energy sectors were once again among the week’s worst casualties. However, market bounced off lows late in the week on expectation of strong 2Q08 results. Meanwhile, foreign selling continued its course this week. Oil price declined heavily to trade near two-week low as USD rose and Iran downplayed the possibility of war, before jumping back as Iran continued to test-fired missiles as part of war games.

The information contained herein is AYF's opinion at the time of its publication and subject to change without prior notice.

credit: www.ayfund.com