Transcript Outlook 2013: Cyclical Improvement, Structural Risks

Martin Arnold
Director - Research Analyst
ETF Securities
Swiss Arab Wealth Management Forum
Martin Arnold – Director - Research
Outlook 2013: Cyclical Improvement, Structural Risks
The US economy is recovering
The US housing market has shown signs of improvement, the US services and manufacturing
ISMs have picked up, US payrolls have improved and unemployment remains near a 3 year low.
Falling Unemployment and Rising Housing Market in the US
Monthly, From March 31, 2009 to January 31, 2013
1,000
11.5
Housing Units Started (Units, LHS)
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Dec 12
Sep 12
Jun 12
Mar 12
Dec 11
6.5
Sep 11
250
Jun 11
7.3
Mar 11
375
Dec 10
8.2
Sep 10
500
Jun 10
9.0
Mar 10
625
Dec 09
9.8
Sep 09
750
Jun 09
10.7
Source: Bloomberg, ETF Securities
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Unemployment Rate (%, RHS)
875
Mar 09

China’s economy is also starting to pick up
China Growth Starting to Turn
% (yoy)
25
Industrial Production (lhs)
Growth of China's Power Cable Output Remains Strong
Index
Monthly data, From December 31, 2005 to December 31, 2012
6
PMI (rhs)
70
900,000
China industrial output - Power Cable (LHS, mln km)
China refined copper consumption (RHS, metric tonnes)
800,000
5
20
700,000
60
15
4
600,000
500,000
50
10
3
400,000
2
300,000
40
5
200,000
1
100,000
0
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
30
Jan-13
Source: Bloomberg, ETF Securities
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0
Dec 05
Dec 06
Dec 07
Source: Bloomberg, ETF Securities
Dec 08
Dec 09
Dec 10
Dec 11
0
Dec 12
But still substantial structural risks

Sovereign debt remain the biggest risk to the global outlook.

European sovereign risks also remain high. Weak growth increases the risk of fiscal target
misses and further bond market turmoil in 2013.
Gross Debt/GDP Levels
% of GDP
140
European GDP Growth (YoY, % Change)
Quarterly, Dec 2002 to Dec 2012
8
120
4
100
80
0
60
-4
40
1993
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1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
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Dec 12
Jun 12
Dec 11
Jun 11
Jun 10
Dec 10
Dec 09
Spain
Jun 09
Dec 08
Jun 08
Jun 07
France
Dec 07
Dec 06
Jun 06
Jun 05
Source: Bloomberg (IMF data), ETF Securities
Dec 05
Italy
Dec 04
Jun 04
Dec 03
Jun 03
Jun 02
0
1991
Germany
-8
Dec 02
Source: IMF, ETF Securities
United States
Euro area
Dec 01
Italy
Spain
United Kingdom
20
Low interest rates here to stay
Central Bank Target Policy Interest Rates
7
Federal Reserve
European Central Bank
Bank of England
6
5
%
4
3
2
1
Source: ETF Securities
Page 7
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Oct-2012
Oct-2011
Oct-2010
Oct-2009
Oct-2008
Oct-2007
Oct-2006
0
Is the Supercycle Over?
Rising growth and monetary easing bullish for commodities
All Commodities vs. OECD Leading Indicator
Monthly, December 1992 - December 2012
60%
15%
40%
10%
20%
5%
0%
0%
-20%
-5%
-40%
Source: Bloomberg, OECD, ETF Securities
For Professional Investors Only, Not For Public Dissemination
2012
2011
2010
2009
2008
2007
2006
2005
-15%
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1993
1992
1994
World OECD Lead Indicator (yoy%) (rhs)
-60%
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-10%
DJ-UBS All Commodities Index (yoy%)
Rising per capita incomes driving structural increase in
commodity demand
Rising per Capita Incomes Drive Commodity Demand
Energy Use (Kg of oil equivalent per capita)
8,000
USA
7,000
6,000
Australia
Russia
5,000
Germany
4,000
France
Malaysia
3,000
Italy
Mexico
1,000
Brazil
Egypt
India
0
0
5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000
Sources: World Bank, ETF Securities
Data for 2010
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UK
China
2,000
Japan
GDP per capita (current US$)
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China and India still in early stages of development


Although relatively strong over recent years, China and India’s industrial development is only in
its early stages, if previous historical development patterns in Asia are a guide.
With per capita growth still relatively modest by historical peer comparisons, this suggests
substantial further potential industrialization-linked demand for a wide range of commodities in the
coming years.
Gross National Income ($US per capita)
Asian Development Rates
45,000
Japan (t=0, 1962)
40,000
Korea (t=0, 1974)
35,000
China (t=0, 1995)
30,000
India (t=0, 2002)
25,000
Malaysia (t=0, 1973)
20,000
15,000
India
10,000
China
5,000
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48
Time (years)
Data: Annual
Sources: World Bank, ETF Securities
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ETF Securities CHF Hedged Commodity Product Range
Listings on SIX Swiss Exchange
Swiss Franc Daily Hedged Agriculture DJ UBS FDSM
Swiss Franc Daily Hedged Aluminium
Swiss Franc Daily Hedged Brent Crude
Swiss Franc Daily Hedged Cocoa
Swiss Franc Daily Hedged Coffee
Swiss Franc Daily Hedged Copper
Swiss Franc Daily Hedged Corn
Swiss Franc Daily Hedged Cotton
Swiss Franc Daily Hedged Energy DJ UBS FDSM
Swiss Franc Daily Hedged Gold
Swiss Franc Daily Hedged Grains DJ UBS FDSM
Swiss Franc Daily Hedged Industrial Metals DJ UBS FDSM
Swiss Franc Daily Hedged Lead
Swiss Franc Daily Hedged Longer Dated Agriculture
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Swiss Franc Daily Hedged Longer Dated All Commodities
Swiss Franc Daily Hedged Longer Dated Energy
Swiss Franc Daily Hedged Natural Gas
Swiss Franc Daily Hedged Nickel
Swiss Franc Daily Hedged Platinum
Swiss Franc Daily Hedged Precious Metals DJ UBS FDSM
Swiss Franc Daily Hedged Silver
Swiss Franc Daily Hedged Softs DJ UBS FDSM
Swiss Franc Daily Hedged Soybeans
Swiss Franc Daily Hedged Sugar
Swiss Franc Daily Hedged Tin
Swiss Franc Daily Hedged Wheat
Swiss Franc Daily Hedged WTI Crude Oil
Swiss Franc Daily Hedged Zinc
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