Mubadala Fund Alerts to Possible Shock in Commodities Market

RIO DE JANEIRO, BRAZIL – Commodity markets are expected to be rocked by the impact of the coronavirus on business worldwide, according to a senior executive of the Mubadala Investment fund, managed by the government of Abu Dhabi.

Declining commodity prices are a risk for emerging economies that rely on the production of raw materials, and investors in those markets should “be a little cautious,” Mubadala Vice President Waleed Al Mokarrab Al Muhairi said Tuesday in Abu Dhabi. The uncertain outlook for the coronavirus has made it more difficult for investors to allocate money, he said.

The disease affects economic growth, as airlines cancel flights and plants look elsewhere for components they would have purchased from China, where the coronavirus originated. Growth in demand for oil was already weak due to excess supply, and Brent-type oil, a global benchmark, has accumulated a decline of 18 percent this year.

“Commodities will be impacted,” said Al Muhairi. “You see it in aluminum, iron ore and oil.” Manufacturers are now relocating some operations and supply chains from China, he added.

Oil producers in the Middle East need to follow up on initiatives to diversify economies and prepare for situations when oil sales generate less income, Al Muhairi said.

The Mubadala fund is part of Abu Dhabi’s plan to invest in new technologies and plants that can create jobs and reduce dependence on the oil-rich emirate. The fund invests in sectors such as natural gas, chemicals, metals and manufacturing from Latin America to Asia.

Al Muhairi remains optimistic about Brazil and other large emerging markets with large economies. To survive commodity price volatility, investors need to target countries that have a variety of business sectors and do not rely solely on raw material production, he said.

Source: InfoMoney

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