CM-Equity’s resource stock index, the CM-Equity Global Natural Resources Index (GNR Index), that was launched two years ago, again outperformed the most important resource indices. The Index has been continuously (every 15 seconds) published by Solactive.
Composition: The CM-Equity GNR index covers the entire world of resource stocks, from precious metals over base metals to agriculture and energy like oil and gas. In addition, within the 60 index stocks there is a division to 1/3 in the stages of exploration/development, junior producers and senior producers. Thus, the CM-Equity GNR index reflects the commodities sector in an optimal way by its construction.
Selection: The stock selection is based on a fixed selection process, which includes hard and soft criteria. Hard selection criteria include, inter alia, the market capitalization, the average trading volume in the stock market or country ratings. Soft factors are for example the management track record or geological conditions.
Performance: From its launch to the rebalancing on 30/06/2015, the index has lost about 17.5% in value and thus followed the general downward trend in resource stocks. However, the CM-Equity GNR Index significantly outperformed pure precious metals indices as HUI (-45.5%) or XAU (-41.9%). Closing level on 30/06/2015: 82.49 points. Exchange rate changes supported the performance of the index to increase by nearly 3.4% since the index start. Thereby, the weak EUR against USD and GBP benefited the index while the weak performance of commodity currencies CAD and AUD against the EUR burdened the development of the index. Since the start at 100 index points, the range has been between 69.57 points in the low and 110.95 points in the high.
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Weighting: Since the start of the index, we have had an overweight in precious metals. For the rebalancing on 01/07/2015, we maintain this overweighting. 28 companies belong to the precious metals sector, which amounts to a share of 46.7%. Compared to the rebalancing on 01/01/2015, this is an increase of one stock position (before: 27 companies, 45%). Changes in the company selection are as follows: Due to the lack of volume, Pilot Gold and Sabina Gold & Silver were replaced by Integra Gold and Pretium Resources. Dalradian Resources was added to the index. Also the energy sector was increased from 15 to 16 stocks. The newly added position is Nexgen, an uranium explorer in Canada. Base metals were reduced from 16 to 14 stocks. This is mainly due to the sustantially reduced liquidity of exploration companies in this sector and the worse outlook compared to precious metals from our view. Agriculture (2) remains unchainged at 3.3%.
Insights: Since the launch of the index, 8 Index companies have been taken over, which equals 13.3% of all Index companies: Ampella Mining, Coastal Energy, Lumina Copper, Papillon Resources, Sulliden Gold, QR Energy, Kodiak Oil & Gas und Probe Mines. Further on, there have been 2 Spin-Offs: Syrah Resources → Jacana Minerals, BHP Billiton → South 32.
It is also worth mentioning that none of our portfolio companies had to go into insolvency or was liquidated. This fact as well as the number of take-overs shows the significance of the selection process and the choice of the right criteria!
Overall, it must be stated that the resource sector has been experiencing a downward trend since 2011. This sector could bottom out on the current level. In contrast to the big resource indices, the CME GNR index had its lowest level in December 2014. The further development of energy stocks remains to be seen. In 2014 they suffered from a rapidly price decline in oil and gas. This downturn has been terminated in the meantime, that can also be seen in the recovery of the corresponding shares in the CM-Equity GNR Index.
The decisive factor for the following months is the development of the underlying prices of gold and silver as well as of industrial metals and energy. We expect to see arecovery at the earliest in the end of Q3 respectively Q4 2015. During the summer months, there might be one or more setbacks, especially in view of the difficult stock market situation in Asia as well as the uncertainties in the euro zone. Many market participants fear a growing uncertainty regarding the worldwide economic development for the coming months. This might lead to falling prices, particularly in basic metals and energy resources.
The current index value can be found on all relevant financial portals, Bloomberg, Reuters or on our website.
Please click here to see the current composition of the index.
About CM-Equity: CM-Equity AG is a fully regulated investment banking and asset management company founded in 2002 and headquartered in Munich. The company provides a wide range of financial services to a diversified client base that includes corporations, institutional investors, family offices and fund managers as well as high-net-worth individuals. CM-Equity actively co-invests along its clients in highly attractive deals directly (private and public companies) that are sourced and filtered globally. The main focus is on energy and mining, life sciences, consumer, digital health, big data analytics, tech and mobile apps. The company operates in all major financial centers around the world within a network of regulated banks and brokers.
About Solactive: Since the founding of the company in 2007, Solactive has become one of the leading providers of financial markets indices. The company develops, calculates and markets own indices and also acts as a neutral calculator of third party indices. What distinguishes Solactive from other index providers which usually have a comprehensive set of benchmark indices is the clear focus on the customized index segment. Solactive currently calculates more than 900 indices across all asset classes for more than 90 international clients in Europe, North America and Asia. Approximately 20 billion USD are invested in indices calculated by Solactive, primarily via ETFs. Quickness and flexibility as well as highest quality and service standards have made the company one of the fastest growing index providers in the world over the last years. Cooperations with well-known stock exchanges and index providers in emerging markets complement Solactive’s indexing activities.
Please feel free to contact us for any questions regarding the CM-Equity Global Natural Resources Index.