City Natural Resources riding the commodity wave

4th Oct 2010 14:28

City Natural Resources High Yield Trust, the investment trust focused on mining and resource stocks, has had the proverbial roller-coaster ride over the last 15 months and is currently enjoying a sharp ascent.In what chairman Geoff Burns termed a "year of two halves", the trust's total return in the first six months of 2010 was just 1.9%, compared to a return of 36.2% in the second half of 2009. For the 12 months to 30 June 2010 the net asset value total return was 38.7%, slightly lower than the 40.0% from the index against which the trust benchmark's its performance.On the plus side, the modest return the trust achieved in the second half of its financial year was better than the FTSE All-Share index could manage; the All-Share fell by 7.9% in the six months to end-June.More encouragingly, since the end of the reporting period the company's net asset value per share has stormed up to 293.5p, from 226.0p at the end of June."The market rally since 30 June 2010 has seen most of the ground lost in the second half of our year regained, but it does not wholly convince and a slightly febrile atmosphere persists. All may yet end well, but a weaker than expected recovery in the USA and hints of a policy slowdown in China, especially around the property sector, suggest that the possibility of renewed slowdown, or even double dip recession in the developed world, cannot be discounted," Burns said. "If the strength of gold, the company's largest single commodity weighting, impresses more than that of oil, then the recent marked improvement in the price of uranium must not be forgotten; copper and rare earths have stood us in good stead; and, the threat posed to crop production by La Niña and storm damage in Indonesia has reawakened interest in soft commodities such as palm oil and rubber where we are well represented," Burns added.