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This guru favors commodities too! 
(Mon, 15 Mar Pre-Open) 
 
Famous investor Jim Rogers has made no bones of the fact that he still favors commodities over the long term. However, one can now add another name to the list of commodity lovers. That of a fellow famous investor Mark Mobius. Yes, that is right. The guru of emerging markets, as Mobius is widely known, has recently said that commodity related investments will remain an important avenue to gain exposure to the growth trajectory of nations like China and India.

And it isn't that Mobius is not aware of the risks involved in investing in commodities. He correctly observes that risks from derivative contracts, capital flight and sudden changes of sentiment by leveraged investors like hedge funds will continue to exist. However, as per Mobius, these reasons do not outweigh a positive long-term picture for commodities in view of the growth that lies ahead for emerging markets.

We believe Mobius could be right on the button here. While commodity prices could take a hit in the near term on account of deleveraging in the developed nations and flight to safety, over the long term, commodities can head nowhere but northwards. This is as countries like China and India try to bring millions and millions of consumers out of poverty, thus more than making up for the fall in demand from developed nations. Add to this the fact that in the last few years, not a lot of capital has been poured into the commodities space and this may create a lag between the time demand is met by the extra supply coming on stream.

Doubts about the Chinese bubble remain
Of course, there is one risk to long-term bullish outlook for commodities. The implosion of China. Better still, significant economic slowdown for a prolonged period. Indeed, the number of China bears has multiplied in recent times as they argue that a country that a country that has unleashed one of the biggest stimuli as a percentage of GDP escape easily, without undergoing significant pain. However, not all agree. As per a leading financial services company, there is presently no signs of any bubble in China.

It goes on to add that although China might have invested huge sums to boost domestic demand and create infrastructure, it has not created an overcapacity or a bubble. Although the firm does agree that in certain pockets like luxury housing, there is a high possibility of a bubble. It further added that with the Chinese government shifting from investing in physical infrastructure to investing in social infrastructure, there could be huge opportunities for US exporters. Looks like China will continue to remain a black box in the near term for some time to come.

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