[LFX]

Commodity prices will be well supported before correcting sometime in H1 2010. Commodities benefit from heavy Central Bank liquidity and a build-up of foreign reserves globally some of which clearly seeps to commodities and commodity related currencies such as the CAD. The G20 meeting keeping the stimulus on is supportive. For example, in China, commodity players stayed with their bullish position as the PBOC reassured that liquidity conditions would remain ample and those reassurances were even intensified under the impression of the unwanted local equity market volatility in China. August credit supply exceeding RMB 400bln is consistent with China keeping credit growth strong for now. Moreover, some of China’s credit growth went into deposits and hence has not been used for investments suggesting that over the next few months the risks deriving from changes within China’s credit situation is minor. China’s inflation rate is negative and has stopped to fall only a couple of months ago, hence there seems to be no
need acting quickly. However, market expects China’s inflation to increase by 6% by the end of 2010 suggesting that higher RMB interest rates and tighter credit conditions well be big on the next years agenda of the PBOC.