fundamental analysis - advance level research & development department, mex. all rights reserved

Fundamental Analysis- Advance Level

RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

Disclaimer

This presentation is being provided solely for informational purposes. Mercantile Exchange Nepal Limited does not warrant the accuracy or completeness of any information provided in this presentation and such information is provided without any correctness or condition of any kind. Neither Mercantile Exchange Nepal limited nor any other person associated with the creation of this presentation or its contents shall be liable or responsible to any person for any harm, loss or damage that may arise in connection with the use of this presentation, including without limitation, any indirect, third party, or consequential damages.


Precious Metal

• Gold• Silver• Platinum• Palladium


Base Metal

• Copper


Energy

• Crude oil• Brent crude• Natural gas• Heating oil


Agro Commodities

• Wheat• Sugar• Corn• Soybean• Soybean oil• Cocoa• Coffee• Cotton


Gold

– Major Producers• China, United States, South Africa, Australia & Peru

– Major Consumer• India ,China

– Used for Jewelry followed by Investment, industrial, electronic and dentistry.


Gold…

• Data to watch– State of US and Euro zone economy– Factors that affect the US dollar– Demand of jewelry in Indian and Chinese market– Interest rate policy of major economies around the

globe– IMF announcement regarding it’s gold holdings – Seasonal factors

• During the festival season in India and China, price tend to normally rise.


Silver

• Major Producer– US, Mexico, Canada, Peru, Russia and Australia

• Major Consumer– US, China, Mexico

• More than two third of silver is the by product of lead, copper and zinc.

• Data to watch • US Dollar affect the price of silver • Any major change in US economy is important for price of

silver• Silver is highly correlated to the price of gold.


Palladium

• Major Producer– Russia

• Norilsk Nickel mine• Gorkhran and • Russian central bank

– South Africa • Major Consumption

• Automotive, dental and electronic purpose• Nearly half of the palladium production goes to production of

auto catalysts in automobile sector• Palladium demand is correlated to the health of auto industry


Palladium..

• Data to watch– It is necessary to follow mining news from the major

producers– Any major change in the automobiles sector– News regarding palladium stock with Russia and South Africa– Russia is the only country which holds significant stock of

palladium. Russian government export policies have significantly influenced world palladium supply and prices volatility.


Platinum

• Major Producer– South Africa and Russia

• Major Consumer– Japan, US, EU and China

• Platinum is integral part of the production for 20% of all consumer goods.

• mainly used to make jewelry, manufacturing laboratory equipment, electrical contacts, dentistry equipment and other devices.

• Japan consumes 85% of the platinum jewelry that is produced in the world.


Platinum…

• Data to watch – Over 90% of platinum production totally depends upon the

four major mines• Rustenburg (South Africa), • Impala (South Africa), • Lonrho (South Africa) and • Norlisk (Siberia).

– Policies of South Africa and Russia – Size of Russian stock for platinum– Economic situation in the consuming countries like Japan,

U.S and E.U.


Copper• Copper

– Major Producer• Chile, USA, Indonesia, Peru and China

– Major Consumer• China, USA and Euro zone

– Copper is commercial metal which is used by housing, automotive and electrical industries. So its demand is affected by the general state of major copper consuming economy

– Copper prices tend to be strong in the early spring in the US due to the purchase of copper by the housing and automobile industries for their peak production levels during late spring and summer.

– After the peak demand during late spring in the US, copper demand declines during the summer, and prices soften during the summer and fall.

– Chinese Industrial and Economic/Interest Rate data also tend to have a strong impact on Copper prices.


Crude Oil

• Crude oil– Major Reserve

• Saudi Arabia, Iraq, Canada, Iran and Kuwait– Largest Producer

• Saudi Arabia, Russia, US, Iran– Major Consumer

• US, China, Japan, Euro zone– OPEC countries control 40% supply of crude oil globally.


Crude Oil…

• Data to Follow– The American Petroleum Institute (API) report– Energy Information Administration (EIA) report– If any major disruption in supply occurs, there will be upward

pressure on prices.– Geopolitical tension in major oil producing countries also

affects the price of crude oil.– Weather condition also affects the price of crude oil. During

American winter, weather forecasts affect the price of crude oil.

– Almost all oil deals worldwide are priced in US dollar and dollar devaluation puts pressure for higher oil prices.

– Major announcements by OPEC and IEA (International Energy Agency).


Crude oil…

• OPEC (Organization of Petroleum Exporting Countries)– OPEC countries hold 81.33% of global oil reservoir.– Global oil production is controlled by the OPEC decision.– OPEC meeting, its agenda and outcome usually shake the oil

prices– OPEC can affect the oil price by regulating the volume of

production.– Disputes among the member nation also impact the oil price. – Major Publication

• OPEC bulletin – Monthly publication• Monthly oil market report• World oil outlook• Annual statistical bulletin


Brent Crude

• Production– North Sea

• Consumption– UK, Norway, Denmark, Netherland and Germany

• Used as the pricing benchmark for deliveries from Europe or bound to Europe.

• The refineries for Brent crude are located in Northwest Europe.


Brent Crude…

• Data to watch • Brent accounts for less than 1% of global oil production • However, it determines the price of more than 60% of

internationally traded crude oil• Oil produced from Europe, Middle East and African countries

tend to be priced relative to Brent crude.• There is generally negative correlation between Brent crude

and US dollar• There is positive correlation between WTI and Brent.

However, the volatility differs.


Natural Gas

• Major Producer– Middle East, Russia and Europe

• Major Consumer– USA

• It is the main source of energy for daily needs and activities and is the major component of worlds energy supply.

• Data to watch• Getting updates from the US Department of Energy, as U.S. is

the world’s largest consumer of natural gas• Any negative/positive news in natural gas mines affects the

price of natural gas


Heating Oil

• When crude oil is refined, then 25% of the oil becomes heating oil.

• USA is the world largest heating oil consumer and also produces 85 percent of its requirement.

• Heating oil is high on demand during the American winter season.

• Heating oil prices generally follow crude oil prices.• Data to follow

– EIA weekly report.– Heating oil is mainly used during the winter. So it’s important

to keep eye on the weather during the month of December, January and February.

– Major portion of the heating oil is consumed in the Northeast part of US. So it’s important to focus on the weather of Northeast of US.

– RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

Agro Commodities

• Wheat– Major Producer

• China, India, US , Russia– Major Consumer

• EU, China, India, Russia, US, Pakistan– Data to watch

• News released by United States Department of Agriculture (USDA).

• Weather conditions in China, U.S., India, Russia and other major wheat producing countries


Sugar

• Major Producer and Consumer– Brazil, India, China and Thailand

• Around 79% percentage of sugar is made from sugar cane.

• Any news coming out of the largest producing and consuming countries have an effect on the price of the sugar.

• Updates from U.S. Department of Agriculture• Tracking the weather pattern in the major sugar

producing countries as weather affects the production of sugar


Corn

• Major producer– USA, China, Brazil and Europe

• Major Consumer– Japan

• USA is the largest exporter of corn accounting more than half of global export.

• It’s important to follow the major corn activities in USA.


Soybean

• Major Producer– Brazil, Argentina, China

• Major consumer– USA

• Soybean is used for extracting soybean oil• Getting updates of United States Department of

Agriculture


Soybean Oil

• Major Producer– USA, China, Argentina, Brazil

• Major Consumer– India, China, Pakistan, Bangladesh, Iran, South Korea and

European Union

• Soybean oil is produced from soybean.• Data to watch

• Soybean oil is mainly used by the food industry in a variety of food products like bread, mayonnaise, non-dairy coffee creamers, salad dressings, sandwich spreads, and snack foods.

• Production quantity of soybean and demand of soybean oil in soybean producing and consuming countries respectively.


Cocoa

• Major Producer– Ivory Coast, Ghana, Indonesia, Nigeria and Brazil.

• Major Consumer – USA and Netherland

• Europe, North America, Japan and Singapore are main consumer of cocoa in global market

• Data to follow– World largest producer of cocoa Ivory Coast and Ghana are

unstable countries. Political, Social and Labor issue regularly threatens to decrease and disrupt the supply of cocoa.

– Black Pod disease is the main threat to cocoa. A major outbreak of this disease can move the price of cocoa to higher level.


Coffee

• Major Producer– Brazil, Vietnam, Colombia, Indonesia and Mexico

• Major Consumer– USA, Germany, Japan and Italy

• There are two main species of coffee beans grown worldwide – i.e. Arabica and Robusta.

• Brazil produced more than one third of the global coffee supply • i.e. almost three times more than 2nd largest coffee producing

country. • So it’s quite important for investor to keep an eye on the Brazil

coffee industry. • Even small incidents can hamper the world coffee production

and supply. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

Cotton

• Major Producer– China, India, US, Pakistan, Brazil

• Major Consumer– China, Turkey, Vietnam, Mexico

• Climate of the major producing countries affect the cotton production consequently affect the cotton price.

• Use of synthetic fiber is major competition for the demand of cotton.– Major producer shifting to synthetic fiber can have effect in the

demand of cotton.

• Cotton seed prices affect the market.– Rise in the cotton seeds shifts farmer to other cash crop and

shortage of cotton.


For further updates, Like Us on Facebook!

Link: https://www.facebook.com/mexhome

https://www.facebook.com/mexhome

fundamental analysis - advance level research & development department, mex. all rights reserved

Documents