Commodity prices to rise if transition to green energy is shortened, CIO warns

[MUMBAI] The transition to green energy will take longer than expected, but commodity prices will rise even further if this time frame is forcefully shortened, Conning Asia-Pacific's chief investment officer said on Tuesday.

The next leg-up for commodity prices will be triggered by supply constraints, a lack of investment and higher regulatory costs, Desmond Tjiang told the Reuters Global Markets Forum.

It will take time for supply-chain disruptions to sort themselves out, but "the market might not take it, as it doesn't have patience", he said.

Conning manages US$124.6 billion in assets globally, of which about US$2 billion is under its Asia-Pacific arm.

Mr Tjiang, who has a target for Brent crude prices of US$90 per barrel, expects the Organization of the Petroleum Exporting Countries (Opec), Russia and their allies (OPEC+) to maintain a July deal, under which 400,000 barrels per day (bpd) would be added until at least April 2022 to phase out 5.8 million bpd of existing production cuts.

Oil prices have been positively surprised by a demand switch from natural gas, Mr Tjiang said. He said he expected global equity markets to fall by less than 5 per cent from current levels by the end of 2021. "We are still overweight on equities, but have been dialling back the risk in the near-term, given a more complex macro picture."

MSCI's gauge of global stocks was down 0.1 per cent, but off an over-three-month low hit during Asian trading, tracking a broad sell-off on Wall Street.

There is value in Chinese equities, he said, but added he was "cautious for now," with investments into China depending on "how and when" the government responds to reverse the country's economic slowdown and "huge amount of uncertainties".

He was positive on Japan due to its exposure to global manufacturing and automation, along with "the lack of inflationary threat and continuous supportive fiscal (and) monetary policies, versus other developed markets."

REUTERS