Will Dry Bulk Shippers Profit from Rising New Chinese Yuan Loans?
Is the Current Dry Bulk Shipping Recovery Sustainable?
The importance of credit to an economy
Loans play an important role in helping an economy grow. Loans stimulate consumption and investment and create greater overall demand. In China, capital has primarily been supplied by bank loans. It’s crucial to note that almost all major banks in China (MCHI) are state-owned, which gives Beijing significant control over the economy in the sense that it can regulate new loans issuance. This means that watching new loans on a monthly basis can help investors better forecast demand from China.
New yuan loans pick up in June
New yuan loans refer to new lending minus loans repaid. The People’s Bank of China releases this data on a monthly basis. In June, new yuan loans totaled 1,270 billion Chinese yuan, up from 900 billion yuan in May. Economists were expecting the new yuan loans to come in at 1,000 billion yuan.
In the first half of 2015, the new yuan loans reached 6.56 trillion yuan, up from 5.74 trillion yuan in the same period last year.
Impact on economic activity
Lending activity, as shown by new yuan loans, has picked up in China. This is likely due to easing measures taken by the Chinese government. A sustained pickup would be positive for manufacturing and construction activity in the country, and should have positive spillover effects on dry bulk shipping. This would benefit dry bulk shipping players, including Diana Shipping (DSX), Navios Maritime Partners (NMM), Scorpio Bulkers (SALT) and Star Bulk Carriers (SBLK).
The SPDR S&P 500 ETF Trust (SPY) provides exposure to the broader industry.
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