With U.S. cotton futures trading limit-up for two straight
sessions and prices at a new record as weather-related supply
jitters grip a market fueled by surging emerging markets demand,
investors are turning to the iPath Dow Jones-UBS Cotton Subindex
Total Return ETN (NYSEArca:BAL).
BAL jumped today $3.63, or 6.1 percent, to $62.91, after the
exchange-traded note gained more than 4 percent on Friday. The ETN,
whose price is based on cotton futures, has gained more than 60
percent in the past three months, according to data compiled by
Creations on Friday surged to $2.9 million, bringing total
assets in the fund to $33.4 million. That's up from $20.9 million
at the end of September. Through the first three quarters of 2010,
the ETN suffered net outflows of $3.7 million, data compiled by
IndexUniverse.com show. The ETN is a debt obligation backed by the
full faith and credit of its issuer, Barclays Bank, and delivers
the exact return of its underlying index, minus expenses.
Cotton's move has turned parabolic in the past few sessions, as
financial markets have fretted that bad weather in cotton-producing
areas all over the world-from the U.S., the world's biggest
exporter, to countries like Pakistan and China-would crimp
supplies. Demand from emerging market countries, especially China,
has been expanding. China is the world's No. 1 user.
Cotton futures are now higher than in the post-Reconstruction
Era in the decade following the American Civil War.
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