A key analysis of November's dry bulk shipping indicators (Part 3 of 12)
China PMI influence on dry bulk companies
The National Bureau of Statistics revealed China’s official purchasing managers’ index (or PMI) further slumped to its eight-month low of 50.3 in November, indicating only modest expansion in economic activity. However, the index is lower than the market forecast of 50.6 and October levels of 50.8. The official PMI survey indicated that demand for Chinese goods was stronger domestically than abroad. New export orders dipped.
With PMI data on a downturn, dry bulk shipping companies like Safe Bulkers Inc. (SB), Knightsbridge Tankers Ltd. (VLCCF), Navios Maritime Holdings Inc. (NM), DryShips Inc. (DRYS), and the Guggenheim Shipping ETF (SEA) will be negatively affected.
Interest rates lowering impact
Despite the Chinese government cutting interest rates in November, the economy’s manufacturing sector slowed down, adding pressure on the authorities to scale up stimulus measures. The People’s Bank of China (or PBOC) surprised financial markets on November 21 by lowering interest rates to push growth.
The PBOC’s rate cut couldn’t support the market sentiment significantly, and thus there was very little improvement in activity indicators in November, ANZ research revealed. ANZ research further added that “In order to maintain growth for the whole year at around the official target of 7.5%, Chinese authorities will intensify easing efforts in December to accelerate growth momentum.”
Looking ahead
Qu Hongbin, the chief economist at HSBC, said, “Disinflationary pressures remain strong while the labor market weakened further,” while also noting that the rate cut last month should help bolster property and manufacturing investment.
Going forward, industry analysts believe there will be more interest rate cuts in the upcoming months.
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