Is it crude oil's turn now?
Recently, there has been a lot of discussion about gold, including the non-ferrous metals sector represented by copper and aluminum, which had relatively high gains earlier, though there has been some pullback from the highs recently.
Yesterday afternoon, crude oil started to rise, and as the U.S. stock market opened, the crude oil-related sectors also led the gains.
Currently, the positive news is that U.S.-India negotiations are nearing an agreement, and India will gradually reduce its purchases of Russian crude oil, while the U.S. is also increasing sanctions on Russian crude oil producers. This will undoubtedly tighten global crude oil supply.
Among commodities, the relatively lagging sector is crude oil, which has been falling continuously this year. There are many ways to invest long in crude oil, and many investors might think of going long on indices that track oil prices, such as crude oil LOF, similar to how you might first think of buying a gold ETF when going long on gold.
But just as gold stock ETFs are more elastic than gold ETFs during a gold price uptrend, the same logic applies here. Going long on crude oil doesn’t necessarily mean buying crude oil LOF; going long on crude oil producers might be better, offering a more balanced offense and defense in my view, as shown in the chart below.
Domestic crude oil producers have lower barrel costs compared to overseas giants, with rich valuations and dividends, mainly the 'three barrels of oil' in China. Additionally, coal prices have recently shown signs of stabilizing.
Therefore, it’s time to gradually focus on ETFs with a high proportion of crude oil + coal producers. There are quite a few, such as energy ETFs, oil ETFs, and oil & gas ETFs. The differences among them will be analyzed later.
I noticed that in the portfolio adjustments of the 'Biao Jiu Global Investment Advisory Portfolio' I follow, one of the reasons given by the manager was 'increasing the proportion of Hong Kong dividend stocks with higher non-financial sector exposure.' After checking, it should be the Invesco Great Wall Guoxin Hong Kong Connect Central SOE Dividend ETF.
This product is not unfamiliar to us. I
have introduced it before. This Hong Kong dividend ETF is relatively unique compared to other Hong Kong dividend ETFs because it specifically limits exposure to the financial sector, almost to zero. We’ve covered it before: Completing the Dividend Puzzle, Temporarily Replacing the 'Hong Kong Energy ETF' Fund.
The recent market has been quite volatile, suitable for a defensive stance. After weathering this period, we might be able to continue with another defensive wave.
(Not investment advice)
$Penghua CNI Oil&Gas ETF(159697.SZ) $Harvest Crude Oil Fund(QDII-LOF)(160723.SZ) $Invesco Great Wall CSI China Reform Hong Kong Connect Central-SOEs High Dividend Yield ETF(520990.SH)
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