Crude Tanker Indicators: Positive sentiment (Part 3 of 5)
The importance of China’s PMI
National Bureau of Statistics revealed that China’s official purchasing managers index came in at 51.7 for the month of July as compared to 51 in June. The report added that the Chinese government has ordered tax cuts for small companies and a speeding up of public investment and fiscal spending. Besides, the central bank cut capital reserve requirements for some banks and began re-lending to boost credit.
As oil tanker shipping demand closely ties to China’s oil consumption growth, PMI data has a large influence over Teekay Tankers Ltd. (TNK), Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), Frontline Ltd. (FRO), and the Guggenheim Shipping ETF (SEA).
Major highlights of the report
Ten out of the 12 sub-indices reflected improvement in July readings as compared to previous month. A sub-index for new orders, a measure of both foreign and domestic demand, edged up to 53.6 in July from 52.8 in June, marking the highest level since May 2012. July export orders increased to 50.8 from 50.3 in June. With economic activity continuing to improve in July, it reflects that the cumulative impact of mini-stimulus measures introduced earlier is still filtering through.
Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC commented that they expect policy makers to maintain their accommodative stance over the next few months in order to consolidate the recovery.
China’s economy is indicating signs of improvement post a burst of government stimulus measures. A sign of a pick-up in broader economic growth was reflected through a 7.5% growth rate in the second quarter compared to an 18-month low of 7.4% between January and March.
Economists commented that China’s manufacturing sector looks good with government’s efforts to ease monetary policy and speed up infrastructure investment coming into effect. For the third quarter, analysts expect policy makers to maintain the growth momentum with the government having to launch more mini-stimulus steps. Also, the existing measures must be intensified to guarantee a sustained effect.
The real estate sector which is undergoing a downward correction after a two years rise is the biggest risk that China is currently facing. However, the government is also undertaking measures to minimize the risks.
Lets take a look at how China’s import data is supporting the industry.
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