Commodities will extend gains on increased demand from emerging markets including China, where the higher interest rates announced the week will help to keep the economy stable, according to APG Asset Management. “Emerging markets will keep on growing and consuming commodities,” said Olav Houben, senior portfolio manager commodities at the Amsterdam-based company, which oversees investments for the world’s third-largest pension fund. Oil may climb as global inventories are “worked out,” he said by phone. APG has 260 billion euros ($364 billion) under management, most for Stichting Pensioenfonds ABP, and the company is among asset managers, insurers and banks seeking to profit from rising prices of metals, energy and farm products. China’s growth in metals demand will be “robust,” Rio Tinto Group said yesterday. The increase in borrowing costs in China shows that the government “are concerned about the potential overheating,” said Houben, who has been at APG for a decade and became a commodity portfolio manager five years ago. As China tries to make its economy stable, “that’s bullish for commodities,” he said yesterday, without identifying specific metals or grains. APG’s commodities investments, which are actively managed, returned more than 10 percent during the three months to Sept. 30, taking the year’s gain to just less than 4 percent, he said. Investors in the S&P GSCI Index received 8.3 percent during the quarter, and lost 3.9 percent over the first nine months. Gold’s Record Gold surged to an all-time high of $1,387.35 an ounce this month and is set for a 10th annual gain. Tin, used in packaging, also reached a record, trading at $27,338.50 a metric ton on higher demand and supply disruptions. Soybeans have rallied 16 percent this year, while corn has surged 37 percent. China, the top consumer of raw materials from aluminum to soybeans, grew 9.6 percent in the third quarter and inflation accelerated to the fastest pace in 23 months in September. The People’s Bank of China announced the interest-rate increase on Oct. 19, prompting a 1.9 percent fall in the Thomson Reuters/Jefferies CRB Index of 19 commodities that day. “This economy will keep on growing and has a lot of potential,” said Houben. About 3 percent of the assets APG manages is in commodity futures, and a further 1 percent is in natural resources, including mines, farmland and oilfields. “In the long run we expect good returns,” he said. Metals Demand Global assets under management in commodities soared to a record $320 billion last month, according to Barclays Capital, which forecast continued interest from institutional investors in an October report. Rio Tinto, the world’s third-largest mining company, said urbanization in China would drive growth in metals demand, according to Ian Bauert, China managing director. Demand for raw materials including oil is picking up as the world economy recovers from the financial crisis, which started in 2008, Houben said. Inventories of crude “are being worked out at the moment,” he said. Crude oil stockpiles in the U.S., the world’s largest user, stood at 361 million barrels, or 3.7 percent below the peak reached in May 2009, according to Department of Energy data. Crude oil futures in New York traded today at $81.07 a barrel, little changed over the past year. Stichting Pensioenfonds ABP, based in Heerlen, the Netherlands, is the world’s third-largest pension fund, according to New York-based Towers Watson & Co. Japan and Norway’s government pension funds rank first and second. To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Source