Resources sector equities are more attractive than direct investments in physical commodities due to increasing global demand for resources, Baring Asset Management (Barings) said in a statement on Wednesday.
Valuations for resources companies are trading below historical levels and look set to revert to their long-term mean, making such stocks attractive for investors with a strong understanding of the sector, the investment management firm said.
On a longer-term basis, continued population growth will drive demand for natural resources, energy production and raw materials, which will in turn create growth opportunities for resources companies throughout the value chain.
“As commodity prices are closely correlated with rises in consumer prices, investment in the resources sector has the potential to act as a hedge against inflation,” said Duncan Goodwin, Barings head of global resources.
In addition to oil and gas production, storage and transport of hydrocarbons is becoming an increasingly important factor for investors as countries and regions look to secure a stable and competitive source of energy to sustain economic growth, according to the report.
Barings has been investing in resource-related equities for nearly 20 years and manages more than US$900 million in the asset class.
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