Abu Dhabi fund Mubadala sees commodities ‘fizzle’ due to coronavirus

Commodities markets are set to “fizzle” as the coronavirus crimps business worldwide, according to a top executive at Abu Dhabi’s government-run fund Mubadala Investment Co.

Falling commodity prices are a risk for emerging economies that rely on the production of raw materials, and investors in these markets should “be a little bit cautious,” Mubadala deputy chief executive officer Waleed Al Mokarrab Al Muhairi said on Tuesday in Abu Dhabi.

The uncertain outlook for the coronavirus makes it harder for investors to decide where to put their money, he said.

The disease is hurting economic expansion as airlines cancel flights and factories look elsewhere for components they would have bought from China, where the coronavirus originated.

Growth in demand for oil was already fragile amid a supply glut, and benchmark Brent crude has tumbled 18 per cent this year.

“Commodities are going to be impacted,” Al Muhairi said. “You see that in aluminum, you see that in iron ore, you see that in oil.”

Manufacturers are already shifting some operations and supply chains away from China, he said.

Middle Eastern oil-producers need to continue efforts to diversify their economies and prepare for a future when sales of crude generate less income, Al Muhairi said.

Mubadala is part of Abu Dhabi’s plan to invest in new technologies and manufacturing that can create jobs and reduce the emirate’s reliance on oil. The fund invests in industries including natural gas, chemicals, metals and manufacturing from Latin America to Asia.

Al Muhairi is still bullish on Brazil and other big emerging markets with broad-based economies. To survive volatility in commodity prices, investors need to target countries that have a variety of industries and don’t depend solely on output of raw materials, he said.