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Fundamental Analysis - Advance Level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED.

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Presentation on theme: "Fundamental Analysis - Advance Level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED."— Presentation transcript:

1 Fundamental Analysis - Advance Level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

2 Disclaimer This presentation is being provided solely for informational purposes. Mercantile Exchange Nepal Limited does not warrant the accuracy or completeness of any information provided in this presentation and such information is provided without any correctness or condition of any kind. Neither Mercantile Exchange Nepal limited nor any other person associated with the creation of this presentation or its contents shall be liable or responsible to any person for any harm, loss or damage that may arise in connection with the use of this presentation, including without limitation, any indirect, third party, or consequential damages. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

3 Precious Metal Gold Silver Platinum Palladium RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

4 Base Metal Copper RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

5 Energy Crude oil Brent crude Natural gas Heating oil RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

6 Agro Commodities Wheat Sugar Corn Soybean Soybean oil Cocoa Coffee Cotton RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

7 Gold –Major Producers China, United States, South Africa, Australia & Peru –Major Consumer India,China –Used for Jewelry followed by Investment, industrial, electronic and dentistry. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

8 Gold… Data to watch –State of US and Euro zone economy –Factors that affect the US dollar –Demand of jewelry in Indian and Chinese market –Interest rate policy of major economies around the globe –IMF announcement regarding it’s gold holdings –Seasonal factors During the festival season in India and China, price tend to normally rise. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

9 Silver Major Producer –US, Mexico, Canada, Peru, Russia and Australia Major Consumer – US, China, Mexico More than two third of silver is the by product of lead, copper and zinc. Data to watch US Dollar affect the price of silver Any major change in US economy is important for price of silver Silver is highly correlated to the price of gold. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

10 Palladium Major Producer –Russia Norilsk Nickel mine Gorkhran and Russian central bank –South Africa Major Consumption Automotive, dental and electronic purpose Nearly half of the palladium production goes to production of auto catalysts in automobile sector Palladium demand is correlated to the health of auto industry RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

11 Palladium.. Data to watch –It is necessary to follow mining news from the major producers –Any major change in the automobiles sector –News regarding palladium stock with Russia and South Africa –Russia is the only country which holds significant stock of palladium. Russian government export policies have significantly influenced world palladium supply and prices volatility. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

12 Platinum Major Producer –South Africa and Russia Major Consumer –Japan, US, EU and China Platinum is integral part of the production for 20% of all consumer goods. mainly used to make jewelry, manufacturing laboratory equipment, electrical contacts, dentistry equipment and other devices. Japan consumes 85% of the platinum jewelry that is produced in the world. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

13 Platinum… Data to watch –Over 90% of platinum production totally depends upon the four major mines Rustenburg (South Africa), Impala (South Africa), Lonrho (South Africa) and Norlisk (Siberia). –Policies of South Africa and Russia –Size of Russian stock for platinum –Economic situation in the consuming countries like Japan, U.S and E.U. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

14 Copper –Major Producer Chile, USA, Indonesia, Peru and China –Major Consumer China, USA and Euro zone –Copper is commercial metal which is used by housing, automotive and electrical industries. So its demand is affected by the general state of major copper consuming economy –Copper prices tend to be strong in the early spring in the US due to the purchase of copper by the housing and automobile industries for their peak production levels during late spring and summer. –After the peak demand during late spring in the US, copper demand declines during the summer, and prices soften during the summer and fall. –Chinese Industrial and Economic/Interest Rate data also tend to have a strong impact on Copper prices. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

15 Crude Oil Crude oil –Major Reserve Saudi Arabia, Iraq, Canada, Iran and Kuwait –Largest Producer Saudi Arabia, Russia, US, Iran –Major Consumer US, China, Japan, Euro zone –OPEC countries control 40% supply of crude oil globally. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

16 Crude Oil… Data to Follow –The American Petroleum Institute (API) report –Energy Information Administration (EIA) report –If any major disruption in supply occurs, there will be upward pressure on prices. –Geopolitical tension in major oil producing countries also affects the price of crude oil. –Weather condition also affects the price of crude oil. During American winter, weather forecasts affect the price of crude oil. –Almost all oil deals worldwide are priced in US dollar and dollar devaluation puts pressure for higher oil prices. –Major announcements by OPEC and IEA (International Energy Agency). RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

17 Crude oil… OPEC (Organization of Petroleum Exporting Countries) –OPEC countries hold 81.33% of global oil reservoir. –Global oil production is controlled by the OPEC decision. –OPEC meeting, its agenda and outcome usually shake the oil prices –OPEC can affect the oil price by regulating the volume of production. –Disputes among the member nation also impact the oil price. –Major Publication OPEC bulletin – Monthly publication Monthly oil market report World oil outlook Annual statistical bulletin RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

18 Brent Crude Production –North Sea Consumption –UK, Norway, Denmark, Netherland and Germany Used as the pricing benchmark for deliveries from Europe or bound to Europe. The refineries for Brent crude are located in Northwest Europe. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

19 Brent Crude… Data to watch Brent accounts for less than 1% of global oil production However, it determines the price of more than 60% of internationally traded crude oil Oil produced from Europe, Middle East and African countries tend to be priced relative to Brent crude. There is generally negative correlation between Brent crude and US dollar There is positive correlation between WTI and Brent. However, the volatility differs. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

20 Natural Gas Major Producer –Middle East, Russia and Europe Major Consumer –USA It is the main source of energy for daily needs and activities and is the major component of worlds energy supply. Data to watch Getting updates from the US Department of Energy, as U.S. is the world’s largest consumer of natural gas Any negative/positive news in natural gas mines affects the price of natural gas RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

21 Heating Oil When crude oil is refined, then 25% of the oil becomes heating oil. USA is the world largest heating oil consumer and also produces 85 percent of its requirement. Heating oil is high on demand during the American winter season. Heating oil prices generally follow crude oil prices. Data to follow –EIA weekly report. –Heating oil is mainly used during the winter. So it’s important to keep eye on the weather during the month of December, January and February. –Major portion of the heating oil is consumed in the Northeast part of US. So it’s important to focus on the weather of Northeast of US. – RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

22 Agro Commodities Wheat –Major Producer China, India, US, Russia –Major Consumer EU, China, India, Russia, US, Pakistan –Data to watch News released by United States Department of Agriculture (USDA). Weather conditions in China, U.S., India, Russia and other major wheat producing countries RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

23 Sugar Major Producer and Consumer –Brazil, India, China and Thailand Around 79% percentage of sugar is made from sugar cane. Any news coming out of the largest producing and consuming countries have an effect on the price of the sugar. Updates from U.S. Department of Agriculture Tracking the weather pattern in the major sugar producing countries as weather affects the production of sugar RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

24 Corn Major producer –USA, China, Brazil and Europe Major Consumer –Japan USA is the largest exporter of corn accounting more than half of global export. It’s important to follow the major corn activities in USA. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

25 Soybean Major Producer –Brazil, Argentina, China Major consumer –USA Soybean is used for extracting soybean oil Getting updates of United States Department of Agriculture RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

26 Soybean Oil Major Producer –USA, China, Argentina, Brazil Major Consumer –India, China, Pakistan, Bangladesh, Iran, South Korea and European Union Soybean oil is produced from soybean. Data to watch Soybean oil is mainly used by the food industry in a variety of food products like bread, mayonnaise, non-dairy coffee creamers, salad dressings, sandwich spreads, and snack foods. Production quantity of soybean and demand of soybean oil in soybean producing and consuming countries respectively. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

27 Cocoa Major Producer –Ivory Coast, Ghana, Indonesia, Nigeria and Brazil. Major Consumer –USA and Netherland Europe, North America, Japan and Singapore are main consumer of cocoa in global market Data to follow –World largest producer of cocoa Ivory Coast and Ghana are unstable countries. Political, Social and Labor issue regularly threatens to decrease and disrupt the supply of cocoa. –Black Pod disease is the main threat to cocoa. A major outbreak of this disease can move the price of cocoa to higher level. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

28 Coffee Major Producer –Brazil, Vietnam, Colombia, Indonesia and Mexico Major Consumer –USA, Germany, Japan and Italy There are two main species of coffee beans grown worldwide –i.e. Arabica and Robusta. Brazil produced more than one third of the global coffee supply i.e. almost three times more than 2 nd largest coffee producing country. So it’s quite important for investor to keep an eye on the Brazil coffee industry. Even small incidents can hamper the world coffee production and supply. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

29 Cotton Major Producer –China, India, US, Pakistan, Brazil Major Consumer –China, Turkey, Vietnam, Mexico Climate of the major producing countries affect the cotton production consequently affect the cotton price. Use of synthetic fiber is major competition for the demand of cotton. –Major producer shifting to synthetic fiber can have effect in the demand of cotton. Cotton seed prices affect the market. –Rise in the cotton seeds shifts farmer to other cash crop and shortage of cotton. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

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