Monthly Letter

Elements | September 2023

2023-09-11

This monthly newsletter focuses on China's role in the world economy. We also have some exciting news to share. More about this and several links to further reading below.

On September 1, AuAg Precious Green turned three years old. The fund, which is a modern version of the classic 60/40 portfolio, has generated a stable return every year since its inception. This is thanks to its smart construction that provides exposure to both equities in green technology and physically backed precious metals, primarily gold.

Another piece of news is that we launched a daily traded version of our ETF (exchange-traded fund), AuAg Gold Mining. This means that investors who do not want/can't buy ETFs can now invest in this fund instead. It became available at Avanza from the fund's start on September 1, and more platforms are added continuously. In our press release, you can read more about the difference between our new fund and the ETF (link below).

For us, sustainability is important when we invest, especially when we invest in a sector where change can have a large net impact on our world. In order to make our investment process even better, we have entered into a collaboration with Sanctify ESG. They deliver an AI solution that screens news on public pages so we find out what is being written about our companies in real time. Read more about our partnership in the press release (link below).

Use our unique "Research Centre" on an ongoing basis to take part in our current view of the market and the macro environment. We communicate all the time.

Here are a few media links from the past month:

Investment Solutions

Click on one of the funds below to get to the respective fund page. There you can find more information, such as: how to invest, the updated fund sheets (under "Documents"), and the live ticker price on the holdings.

AuAg Thoughts

Today, the world economy is greatly affected by how things are going for China. China's growth has, in recent years, slowed down significantly after their extremely harsh covid lockdowns. This has led to reduced demand for many goods/products/raw materials, which in turn affects the entire world economy.
There is also significant concern that Chinese real estate company Evergrande's financial problems, which emerged as early as 2021, continue to infect other parts of China's already weak economy. The country's real estate sector makes up as much as 30 percent of the gross domestic product (GDP). More recently, alarming reports about the condition have also come from China's largest non-state real estate behemoth, Country Garden, which has been forced to suspend its payments.
The market has been waiting for support and stimulus from the Chinese state for several months, and now they are finally here. Lower interest rates, helicopter money and quantitative easing, are to be or have already been implemented. This is the catalyst to kick start China again, which is now the world's engine in terms of industrial production. China's current weakness is priced in by the stock market, and this newly launched offensive will, in the future, support commodity demand and, at the same time, create further monetary inflation.
There is also a need to further stimulate the economy (and births of new children) in the face of the demographic problems that China will suffer from for many years after the one-child policy since 1979. They are fast approaching the same problems that Europe is facing, which is a skewed distribution between the proportion of workers in relation to the non-working part of the population.
China has also been communicating that they want to reunite Taiwan with "mainland" China. This can only be achieved by force, and there are now clear signals of military preparations from China. From a purely tactical point of view, unfortunately, it is probably better for China to do it within the next year than to wait - if they really intend to take that step.

AuAg Trends

China has a strong position of power within the commodity market and, above all, regarding so-called rare earth elements necessary in all high-tech equipment/products. China accounts for approximately 70% of the world's extraction and 85% of the further processing of rare earth elements. China also continues to strengthen its position in international trade in commodities. De-globalization and the coming demand increase for metals for the whole world will become increasingly important in the near future.
China has already begun imposing export restrictions on gallium and germanium products used in computer chips and other components to protect national security interests.
In response to US restrictions on technology sales to China, the decision raised concerns that China could eventually limit exports of other materials, particularly rare earth elements. The 17 elements are: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, yttrium.