China’s real estate index
China’s real estate climate index measures the country’s aggregate business activity for land and real estate. Index figures above 100 indicate economic growth while figures below 100 suggest a slowdown in the market.
China’s real estate climate index was at 93.34 in October—compared to 93.4 in September. The chart above shows that China’s real estate climate index has been on a broad downtrend since February 2013.
China’s building slowdown
In October, the building sales in China rose by 12.6% YoY (year-over-year). On a YTD (year-to-date) basis, the building sales rose by 14.9%. However, this is lower than the 15.3% growth in the first nine months of the year.
Impact on dry bulkers
The recent easing measures didn’t have the desired impact on the real estate sector. Weakening real estate activity in China is negative for the global steel industry. Ultimately, this impacts the seaborne trade of iron ore and metallurgical coal.
In turn, this impacts dry bulk shippers carrying iron ore and other materials over long distances including DryShips (DRYS), Ship Finance International (SFL), Navios Maritime Holdings (NM), Scorpio Bulkers (SALT), and Star Bulk Carriers (SBLK). The Guggenheim Shipping ETF (SEA) would also feel the effects of slow growth in real estate sales in China. It invests in major shipping companies around the world. Golden Ocean Group forms 4.9% of SEA’s holdings.
The SPDR S&P Metals and Mining ETF (XME) also gives investors exposure to iron ore, coal, and other commodities.