New investors are flocking to commodity markets, attracted by the profit potential of wild price swings that have deterred more traditional users of the market, the head of metals at Swiss bank UBS AG, said Thursday.
"Regardless of whether prices rise or fall, clients will continue to be interested in commodities," Ashraf Rizvi, global head of metals at UBS, said in an interview. Many base metals stormed to record highs earlier this year, which has been one of the most volatile ever for the market with daily price moves of up to 10 percent.
"This is an extraordinary era for metals markets. Even as markets have hit new highs and then come off, we have seen significant interest from our client base, either bullish or bearish," he said.
He said volatility would remain higher that normal, which would continue to attract new investors. "A new class of investors has entered the fray. These assets are more global than ever before and people are using the market in a very different way than in the past."
"Sometimes volatility can scare off investors but many are attracted to commodity markets because they offer more volatility than other more traditional asset classes." UBS is expanding rapidly into commodity markets. It purchased ABN Amro's futures and options business including net tangible assets for $688 million last week.
"We have acquired ABN's futures and options business and they have included their base metals business within that segment. We are now one of the larger metals houses out there. "We have increased our overall exposure to commodities as an asset class. We are client driven, we are seeing more interest in commodities from our clients and commodities have become an asset class in their own right as a diversifier of risk."
He said that demand for access to commodity markets was coming from the bank's wealth management, corporate and institutional clients. Rizvi said UBS was a strong supporter of electronic trading.
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