Swissquote’s “Themes Trading” platform opens the door to global mega-trends. The broker's experts now cover more than 60 themes. Rare earth metals have been a feature of this ideas exchange since as far back as 2019, when the Swissquote Rare Earth Index was launched. This stock market barometer contains up to 20 companies which are positioned on the rare earths value chain. The starting hypothesis of the Swissquote strategists was that the 17 soft heavy metals that are part of this commodity group are indispensable for modern life. “Rare earth metals are used as components in high technology devices such as smartphones, flat screen televisions, computer monitors and electronic displays,” say the index managers. They are also found in the batteries of electric vehicles as well as in satellites, wind turbines and jet engines.
After a weak start, the Swissquote Rare Earth Index first rose sharply during the coronavirus pandemic, with the lockdown restrictions in place at the time and the resulting surge in demand for electronic goods – think home office – further stimulating the rare earths segment. The themed selection went through a consolidation phase from early 2022, but has recently acquired new impetus. Having appreciated by almost a fifth, the Rare Earth Index is among the top 10 performers of the Swissquote Themes Trading platform on a 30-day view. This has enabled the benchmark to escape the sideways trend of the last few years.
The turnaround can be directly attributed to trade policy. The tariff disputes between the USA and China especially have brought the importance of rare earths into focus. Although the Middle Kingdom – following a temporary interruption – is now supplying these important minerals again, the Trump administration is doing everything it can to reduce its dependence on what is by far the most important supplier of rare earths. The US government’s involvement in MP Materials had delivered a particularly strong signal effect: not only has the state taken a stake in this mining company, but the Californians were also delighted with a multi-year purchase and price guarantee. It goes without saying that MP Materials belongs in the Swissquote Rare Earth Index. The US stock is currently the third-largest component. The heavyweight comes from down under – Lynas Rare Earth makes up 14.5% of the index. The group mines the commodity in Western Australia. The material extracted there is processed in Kuantan, Malaysia, and then delivered to customers in East Asia, the USA and Europe.
A tracker certificate from Leonteq tracks the Swissquote Rare Earth Index without any term limit. The participation product listed on the SIX Swiss Exchange allows investors to diversify their exposure to this important sector and benefit from the expertise of the index sponsor. This is supplemented by a systematic selection process in which Swissquote uses a raft of quantitative calculations to optimise the structure of the underlying. In addition, the index is to be reviewed on a quarterly basis and adjusted if necessary. This allows the managers to consider new arrivals on the stock market or take account of the general momentum of this sector. Holders of the tracker certificate also benefit from possible dividend payments. After costs and taxes have been deducted, the index is adjusted on the back of the distributions from the companies contained in it. The management fee for the structured product is 0.70% p.a.
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