Money manager Van Eck Global has launched an exchange-traded fund (ETF) offering investors exposure to a possible bull-run in the value of ‘rare earth’ metals.
Such metals are crucial raw materials in the manufacture of a number of clean technologies. Investor interest has been piqued by recent threats by China – which controls around 95% of global production – to withhold exports.
Van Eck claims the Market Vectors Rare Earth/Strategic Metals ETF is the first US-listed ETF to offer pure-play exposure to companies “primarily engaged in the producing, refining and recycling of rare earth/strategic metals”.
The ETF – with the ticker REMX – listed on the New York Stock Exchange last Thursday. It tracks an index of 49 equities globally, with 46% in mid-capitalisation stocks of between $1.5 billion and $5 billion in size, 51% in small caps ($200 million-$1.5 billion) and the remainder in micro-caps.
However, the sector is high risk – the index has a price-to-earnings ratio of 38.80, showing that many index constituents are higher-risk growth stocks.
Among the larger components are Australia-listed miner Lynas Corp, accounting for 8.8%, which is due to begin production next year ,and Colorado-based Moly Corp (4.1%), whose rocky initial public offering this July raised less than anticipated.
Analysts are divided as to whether the metals, used in wind turbines and hybrid cars, as well other tech applications such as laptops and smart-phones, are set to soar in value. China has temporarily suspended exports to Japan over a territorial dispute, prompting interest in producers elsewhere.
However, some believe that a bubble is at risk of inflating, with increased recycling or the use of substitutes likely to puncture inflated prices.
Since its listing at $20 last Thursday, the ETF has traded as high as $21.07 and opened today at $20.80.
By. Mark Nicholls
Source: Environmental Finance