The Client is back and the cash register is ringing...
A core theme of our work on the Chinese Stimulus program is that as the Ox starts waking up he will be craving the basic materials that countries like Australia and Brazil provide. In the case of Brazil, data has arrived demonstrating that in the form of increasing shipments of iron ore. Total Chinese ore imports totaled over 52 million metric tons for March, with more than 22 million tons worth coming from Brazil.
Without a doubt this data is a huge shot in the arm for Brazilian exports which are concentrated so heavily on commodities and certainly explains why the Bovespa is trading up again today. Although anecdotal reports put Chinese ore stockpiles at about 1.5 months worth of imports and growing -an uptick that could signify speculative purchasing, all signs point to continued strength so far this month with expectations that it will continue.
We are long the Brazilian equity market via EWZ and remain bullish on prospects there as Chinese demand works through the global chain. In the coming days will be delving into the other half of the export equation for that nation -Agricultural commodities, as well as drivers for domestic demand, but for now the Client is the most important part of the story.
PS: Anyone out there short shipping stocks?
Andrew Barber
Director
