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Martin ArnoldDirector - Research Analyst
ETF Securities
Swiss Arab Wealth Management Forum
Martin Arnold – Director - Research
Outlook 2013: Cyclical Improvement, Structural Risks
For Professional Investors Only, Not For Public DisseminationPage 4
The US economy is recovering
6.5
7.3
8.2
9.0
9.8
10.7
11.5
250
375
500
625
750
875
1,000M
ar 0
9
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Sep
12
Dec
12
Housing Units Started (Units, LHS) Unemployment Rate (%, RHS)
Source: Bloomberg, ETF Securities
Falling Unemployment and Rising Housing Market in the USMonthly, From March 31, 2009 to January 31, 2013
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.
For Professional Investors Only, Not For Public DisseminationPage 5
China’s economy is also starting to pick up
30
40
50
60
70
0
5
10
15
20
25
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
China Growth Starting to Turn
Industrial Production (lhs) PMI (rhs)
% (yoy) Index
Source: Bloomberg, ETF Securities
0
100,000
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600,000
700,000
800,000
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Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12
China industrial output - Power Cable (LHS, mln km)China refined copper consumption (RHS, metric tonnes)
Growth of China's Power Cable Output Remains StrongMonthly data, From December 31, 2005 to December 31, 2012
Source: Bloomberg, ETF Securities
For Professional Investors Only, Not For Public DisseminationPage 6
But still substantial structural risks
0
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1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Gross Debt/GDP Levels
Italy United StatesSpain Euro areaUnited Kingdom
% of GDP
Source: IMF, ETF Securities-8
-4
0
4
8
Dec
01
Jun
02
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02
Jun
03
Dec
03
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08
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09
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10
Jun
11
Dec
11
Jun
12
Dec
12
Germany Italy France Spain
Source: Bloomberg (IMF data), ETF Securities
European GDP Growth (YoY, % Change)Quarterly, Dec 2002 to Dec 2012
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.
For Professional Investors Only, Not For Public DisseminationPage 7
Low interest rates here to stay
0
1
2
3
4
5
6
7
Oct
-200
6
Oct
-200
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Oct
-200
8
Oct
-200
9
Oct
-201
0
Oct
-201
1
Oct
-201
2
%
Central Bank Target Policy Interest Rates
Federal Reserve European Central Bank Bank of England
Source: ETF Securities
Is the Supercycle Over?
For Professional Investors Only, Not For Public DisseminationPage 9
Rising growth and monetary easing bullish for commodities
-15%
-10%
-5%
0%
5%
10%
15%
-60%
-40%
-20%
0%
20%
40%
60%
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11
20
12
DJ-UBS All Commodities Index (yoy%)
World OECD Lead Indicator (yoy%) (rhs)
Source: Bloomberg, OECD, ETF Securities
All Commodities vs. OECD Leading IndicatorMonthly, December 1992 - December 2012
For Professional Investors Only, Not For Public DisseminationPage 10
Rising per capita incomes driving structural increase in commodity demand
0
1,000
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8,000
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000
Rising per Capita Incomes Drive Commodity Demand
Brazil
China
Egypt
UK
Australia
USA
Japan
Italy
Russia
Mexico
Malaysia
GermanyFrance
India
Sources: World Bank, ETF SecuritiesData for 2010
Ener
gy U
se(K
g of
oil
equi
vale
nt p
er c
apita
)
GDP per capita (current US$)
For Professional Investors Only, Not For Public DisseminationPage 11
China and India still in early stages of development
Although relatively strong over recent years, China and India’s industrial development is only in its early stages, if previous historical development patterns in Asia are a guide.
With per capita growth still relatively modest by historical peer comparisons, this suggests substantial further potential industrialization-linked demand for a wide range of commodities in the coming years.
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5,000
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25,000
30,000
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0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48
Gro
ss N
ati
on
al In
com
e ($
US
per
ca
pit
a)
Time (years)
Asian Development Rates
Japan (t=0, 1962)
Korea (t=0, 1974)
China (t=0, 1995)
India (t=0, 2002)
Malaysia (t=0, 1973)
Data: AnnualSources: World Bank, ETF Securities
ChinaIndia
For Professional Investors Only, Not For Public DisseminationPage 12
ETF Securities CHF Hedged Commodity Product Range Listings on SIX Swiss Exchange
Swiss Franc Daily Hedged Agriculture DJ UBS FDSM Swiss Franc Daily Hedged Longer Dated All CommoditiesSwiss Franc Daily Hedged Aluminium Swiss Franc Daily Hedged Longer Dated EnergySwiss Franc Daily Hedged Brent Crude Swiss Franc Daily Hedged Natural GasSwiss Franc Daily Hedged Cocoa Swiss Franc Daily Hedged NickelSwiss Franc Daily Hedged Coffee Swiss Franc Daily Hedged PlatinumSwiss Franc Daily Hedged Copper Swiss Franc Daily Hedged Precious Metals DJ UBS FDSMSwiss Franc Daily Hedged Corn Swiss Franc Daily Hedged SilverSwiss Franc Daily Hedged Cotton Swiss Franc Daily Hedged Softs DJ UBS FDSMSwiss Franc Daily Hedged Energy DJ UBS FDSM Swiss Franc Daily Hedged SoybeansSwiss Franc Daily Hedged Gold Swiss Franc Daily Hedged SugarSwiss Franc Daily Hedged Grains DJ UBS FDSM Swiss Franc Daily Hedged TinSwiss Franc Daily Hedged Industrial Metals DJ UBS FDSM Swiss Franc Daily Hedged WheatSwiss Franc Daily Hedged Lead Swiss Franc Daily Hedged WTI Crude OilSwiss Franc Daily Hedged Longer Dated Agriculture Swiss Franc Daily Hedged Zinc
For Professional Investors Only, Not For Public DisseminationPage 13
Important Information
General
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