“Interest rates on new mortgages in China are being slashed by about 40 percentage points after the central bank set a lower minimum premium to its benchmark loan prime rate.”
Having spent a good part of the thirty-fifth trading week in search of direction, Baltic Dry Index concluded on Friday at 1084 points, without any significant change week-on-week. By decomposing the leading index, Capesizes took a dive whilst the rest of the pack reported needful gains. Being the only segment in the red, Capesizes were trading somewhere between a stimulus anticipation and the actual needs of the spot market, balancing today at just 8,561 daily, considerably lower week-on-week. Kamsarmaxes trended mostly sideways, concluding today at $13,300 daily. Strong trading activity from ECSA has a clear positive bearing on the favorite bulker type of the newbuilding investors lately. Standing some 38.3 percent and 37.5 percent higher month-on-month, Supramaxes and Handies have covered some of the lost ground during the last four weeks, laying at $10,779 and $9,742 daily respectively on this week closing.
A better feeling has become apparent in the manufacturing sector of China during August, with the official manufacturing purchasing managers’ index (PMI) rising to 49.7 in August from 49.3 in July. However, it remained in contraction territory for the fifth month in a row, according to data released by the National Bureau of Statistics on Thursday. Within the official manufacturing index, the new-orders subindex jumped into expansionary territory as it reached 50.2, up from 49.5 a month earlier, while the new-export-orders subindex remained at 46.7 in August, up slightly from 46.3 in July. Output grew the most in five months (51.9 vs 50.2 in July). At the same time, buying activity advanced for the first time since March (50.5 vs 49.5) while delivery time shortened the most in six months (51.6 vs 50.5). Manufacturer business expectations improved slightly last month, with the respective index rising to 55.6 from 55.1 in July. Zhao Qinghe, a senior NBS statistician, said manufacturers expressed more robust optimism and confidence with the help of a raft of supportive government measures announced recently. He further added that “The survey also showed that insufficient market demand is still the major problem confronting companies, and it will take time to consolidate the foundation for a recovery in the manufacturing sector.”
As far as China’s non-manufacturing sector goes, PMI fell by 0.5 points to 51 in August, after the index moderated for four consecutive months with the overall economic slowdown, the NBS added. The construction subindex, which has been partly affected by the ongoing property crisis, stood at 53.8, versus 51.2 in July. Additionally, the country's official composite PMI, which includes both manufacturing and non-manufacturing activities, came in at 51.3 in August compared with 51.1 in July, according to the NBS. Overall, both manufacturing and non-manufacturing indices seem to be converging on a point close to 50, consistent with an economy that is neither expanding nor contracting.
On the same wavelength, the eurozone manufacturing sector continued its sustained contraction in August, according to the latest S&P Global eurozone manufacturing purchasing managers’ index survey released this Friday. The eurozone index rose to 43.5 in August from 42.7 in July, touching a three-month high, but still balancing well below the 50-point mark that separates contraction from growth. The output index followed suit, laying at 43.4, up from 42.7 in July. Meanwhile, the new orders index dropped sharply to 39.0, prompting firms to continue lowering their prices to try to spur demand. Japan's factory activity shrank for a third straight month in August, as manufacturers were squeezed by cost pressures from raw material inflation and rising wages. The final au Jibun Bank Japan manufacturing purchasing managers' index came in at 49.6, unchanged from the previous month. It was the third month the index has come in below the 50.0 threshold. Output and new orders, which contribute the most to the headline figure, remained in contraction, although the reduction in orders was slower than in July. In tandem, the manufacturing sector in South Korea continued to contract in August, the latest survey from S&P Global showed on Friday with a manufacturing PMI score of 48.9. New orders and output, which account for 55 percent of the weight in the PMI calculation, contracted for the fourteenth and sixteenth consecutive months, respectively, the longest sequences for both variables in the survey history. In reference to the world’s largest economy, the S&P Manufacturing PMI was balanced at 47.9 in August 2023, compared to 49 in July. US manufacturing contracted for a 10th straight month in August, but the pace of decline continued to slow, suggesting that the sector could be stabilizing at lower levels.
With Capesizes being in the doldrums and manufacturing activity in contraction across the board, BDI reported an August average of 1150 points, on the low end of the last twenty months. However, China has rolled out a series of policy measures lately that may have a positive bearing on both manufacturing activity and Baltic indices. According to a joint statement by the People’s Bank of China and the National Administration of Financial Regulation, minimum downpayments for mortgages will be cut to 20 percent for first-time buyers and to 30 percent for second-time buyers nationwide. Previously, homebuyers in tier I cities, such as Beijing and Shanghai, had to find downpayments of at least 30 percent to 40 percent. In addition, interest rates on new mortgages are also being slashed by about 40 percentage points after the central bank set a lower minimum premium to its benchmark loan prime rate. Against this backdrop, base metals rallied this Friday on renewed demand optimism.
Data source: Doric