MUMBAI: The spiral in oil prices has attracted many wealthy investors to bet on local commodity exchanges. During the last three months, investors have accumulated rich important positions in local crude oil futures, betting that the U.S. recovery and riots in western Asia will drive prices week after week. Private banking clients of some multinational companies and private banks have been referred by their wealth managers to brokers commodity for taking exposure in oil futures, brokers say some high level.
Since banks can not sell these products directly to their customers do so through brokers in the back of an underlying trade agreement. local exchanges of commodities such as MCX and NCDEX crude supply contracts and gold futures that reflect the shares traded on foreign exchanges such as New York Mercantile Exchange (Nymex) and his arm, Comex. high net worth clients have been informed by the managers of their wealth to diversify their portfolios and generate higher returns while stocks and fixed income products have done very well.
Furthermore, drastic measures by the Reserve Bank of India on the small investors who take positions in derivatives exchanges abroad may have contributed to the construction of positions on local commodity exchanges. "The private banks and some wealth managers are recommending this product to investors only as part of their strategy of" active "trade," said Richa Karpe, director (investments), Altamount Capital Management, a wealth manager Mumbaibased.
Karpe, however, added that his company had not informed their clients to take the local exposure to crude oil futures through an intermediary. The events in the Middle East and North Africa (MENA) have resulted in increased oil above $ 100 a barrel in the first quarter of this year. The price increase has been reflected in an increase in open interest (OI) - positions pending sale - the most active crude futures on MCX. Agency data shows that the OI is now at 16,153 lots (1 lot = 100 barrels), compared to 54 lots from the beginning of the year, the contract price has increased by 12% to 4,742 rupees per barrel during the same period.
Futures contracts allow investors to take exposure to an underlying through the placement of a fraction of the price of a commodity, which makes the reward and risk as high. According to Adam Sieminski, chief energy economist at Deutsche Bank, the first $ 15 leg up (from $ 80 to $ 95) coincided with the market beginning to feel the pinch of the huge increase in global demand, which took place in 2010. "The return leg is $ 15 in Q1 (2011) developments in the MENA region. The export interruption loss Libya ... 1.4mmb / d. .. probably caused at least half of the second stage (or maybe more) as it is raw low sulfur content in the high demand for light products and hard to replace (without some logistical changes) of Saudi spare capacity (which is higher in sulfur content).
The situation in Libya raised fears that other countries could see similar unrest - Yemen, Oman, Bahrain and Algeria, for example. The potential for further oil demand in Japan (once you start the reconstruction) is also playing a role, "he said. However, if a combination of global factors (and there may be some) makes the oil immersion investors will have to either fork out huge margins to keep alive their bets or simply close their positions at a loss.
The risk is exacerbated a bit by the fact that unlike the foreign exchanges, where trading takes place for about 24 hours, the local exchanges of commodities closed at 11:30 pm every day ( 23:55 in winter). Sudden surge of crude oil after the markets closed areas could lead to uncertainty when the market opens the next day, while the rupee movement (against the dollar) could limit magnify gains or losses.
"The perception of the risks that an investor has to assume operations when local stock markets is that commodity trade is not 24 hours like their international peers and the vagaries of the rupee movement," said Suresh Nair, the director of admissions Commodities, a trading and settlement member of MCX and NCDEX. Sieminski add a word of warning. "The downside risk more serious oil prices is the possibility of a global economic slowdown - maybe caused by the faltering consumer confidence and business, or perhaps driven by the adverse impact of oil prices surge .
Deutsche Bank's global team has concluded that the economy of $ 150/bbl oil will shave two percentage points of GDP, which in turn could cause demand for oil to plummet. A global recession is likely to be reduced because of oil at $ 100 per barrel, "he said. Financial managers and private bank offering investment solutions in equity, debt, real estate, private equity, structured products and off-shore assets wealthy investors.
Furthermore, drastic measures by the Reserve Bank of India on the small investors who take positions in derivatives exchanges abroad may have contributed to the construction of positions on local commodity exchanges. "The private banks and some wealth managers are recommending this product to investors only as part of their strategy of" active "trade," said Richa Karpe, director (investments), Altamount Capital Management, a wealth manager Mumbaibased.
Karpe, however, added that his company had not informed their clients to take the local exposure to crude oil futures through an intermediary. The events in the Middle East and North Africa (MENA) have resulted in increased oil above $ 100 a barrel in the first quarter of this year. The price increase has been reflected in an increase in open interest (OI) - positions pending sale - the most active crude futures on MCX. Agency data shows that the OI is now at 16,153 lots (1 lot = 100 barrels), compared to 54 lots from the beginning of the year, the contract price has increased by 12% to 4,742 rupees per barrel during the same period.
Futures contracts allow investors to take exposure to an underlying through the placement of a fraction of the price of a commodity, which makes the reward and risk as high. According to Adam Sieminski, chief energy economist at Deutsche Bank, the first $ 15 leg up (from $ 80 to $ 95) coincided with the market beginning to feel the pinch of the huge increase in global demand, which took place in 2010. "The return leg is $ 15 in Q1 (2011) developments in the MENA region. The export interruption loss Libya ... 1.4mmb / d. .. probably caused at least half of the second stage (or maybe more) as it is raw low sulfur content in the high demand for light products and hard to replace (without some logistical changes) of Saudi spare capacity (which is higher in sulfur content).
The situation in Libya raised fears that other countries could see similar unrest - Yemen, Oman, Bahrain and Algeria, for example. The potential for further oil demand in Japan (once you start the reconstruction) is also playing a role, "he said. However, if a combination of global factors (and there may be some) makes the oil immersion investors will have to either fork out huge margins to keep alive their bets or simply close their positions at a loss.
The risk is exacerbated a bit by the fact that unlike the foreign exchanges, where trading takes place for about 24 hours, the local exchanges of commodities closed at 11:30 pm every day ( 23:55 in winter). Sudden surge of crude oil after the markets closed areas could lead to uncertainty when the market opens the next day, while the rupee movement (against the dollar) could limit magnify gains or losses.
"The perception of the risks that an investor has to assume operations when local stock markets is that commodity trade is not 24 hours like their international peers and the vagaries of the rupee movement," said Suresh Nair, the director of admissions Commodities, a trading and settlement member of MCX and NCDEX. Sieminski add a word of warning. "The downside risk more serious oil prices is the possibility of a global economic slowdown - maybe caused by the faltering consumer confidence and business, or perhaps driven by the adverse impact of oil prices surge .
Deutsche Bank's global team has concluded that the economy of $ 150/bbl oil will shave two percentage points of GDP, which in turn could cause demand for oil to plummet. A global recession is likely to be reduced because of oil at $ 100 per barrel, "he said. Financial managers and private bank offering investment solutions in equity, debt, real estate, private equity, structured products and off-shore assets wealthy investors.
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