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Shipping data seems to confirm this heavy industry bias is purchasing patterns. Baltic shipping indices have shown significant improvement YTD overall, but on a % basis the western Australian route has outperformed the broader freight indices (For the purpose of comparison note that the W. Australian route is a single component of the broader indices and, as such, inherently more volatile), which also supports our fundamental thesis on base metal reflation and Australian equities as a component in the Chinese recovery theme.

Premier Wen Jiabao will announce new stimulus in his annual address tomorrow, with expectation running high that the new measures announced will fulfill the politburo pledge of a “massive” increase. All the cards on the table are in the hands of Beijing at this point, so the speech will be the sole focus of global markets as investors continue to grope for a bottom.

We remain long Chinese equities via CAF and retain a bullish bias on both Australian equities (we sold our EWA this morning to book a gain) and base metals like copper. We are keeping our plow firmly hitched to the OX as long as all available data continues to support our thesis.

Andrew Barber
Director