The World Bank noted this week that “all main commodity prices are expected to decline in 2015, owing to ample supply and, in the case of industrial commodities, slowing demand in China and emerging markets.
“Energy prices are expected to average 43% lower in 2015 than in 2014.”
The World Bank lowered its 2015 forecast for crude oil prices from $57 per barrel to $52 per barrel, citing high global inventory and expectations of increased Iranian supplies after the lifting of international sanctions.
The bank added that agricultural commodity prices fell by 2% in the third quarter and are likely to fall by 13% this year.
Emerging ASEAN countries, such as Malaysia, Thailand and Vietnam, are highly dependent on their crude and rice exports. In addition to grappling with low commodity prices, Malaysia and Thailand have been plagued with fiscal pressure and political instability.
"Investor appetite for emerging debt is rebuilding in a climate where outlook on the advanced economies’ long-term rates was recently revised downward."
Fund houses noted that while the outlook for emerging ASEAN economies remain weak, some interest may be shifting back to these markets, which are viewed as under-valued.
“Investor appetite for emerging debt is rebuilding in a climate where outlook on the advanced economies’ long-term rates was recently revised downward," according to an Amundi Asset Management research note.
“Current trends will continue in weeks to come, in a context of renewed appetite for emerging cyclical risk. On the tactical front, even though it is probably still only a matter of false starts, we continue to reduce our under-exposure to commodity themes; the accumulated under-performance making them particularly sensitive to the slightest good news,” Amundi AM added.
Deutsche Asset & Wealth Management is also optimistic. The firm believes that despite a more muted outlook in the commodity sector, a number of opportunities will open up just in time for a projected year-end rally.