Copper to Drop as China Chokes Property Boom: Chart of Day
Copper to Drop as China Chokes Property Boom
Kevin Lee/Bloomberg
The Shanghai Property Index of Chinese developer stocks which has led moves in copper prices since 2007, is falling.
The Shanghai Property Index of Chinese developer stocks which has led moves in copper prices since 2007, is falling. Photographer: Kevin Lee/Bloomberg
Copper is poised to extend the year’s losses as the Chinese government acts to cool residential property prices that rose at a record pace in April, curbing demand for wires and pipes, according to MF Global U.K. Ltd.
The CHART OF THE DAY shows the Shanghai Property Index of Chinese developer stocks, which has led moves in copper prices since 2007, is falling. Concerns among investors that China will introduce policies including a property tax to curb home prices drove a 29 percent drop this year in the index of 34 real-estate companies traded in Shanghai. China makes up 27 percent of world copper demand, Goldman Sachs Group Inc. said in January.
“There could be further downward pressure on the copper price,” MF Global analyst Jeremy Cave wrote in a report. “Over 40 percent of copper is used in construction, so the relationship with Chinese property markets is clear.”
China’s economy, the world’s third largest, expanded 11.9 percent last quarter from a year earlier, the most in almost three years, after a $586 billion stimulus package and record lending that drove international metals prices higher.
Policy makers are trimming spending this year after a $1.4 trillion lending binge revived growth in 2009. Officials are targeting a 22 percent cut in new loans and have raised banks’ reserve requirements to suck money out of the financial system.
Property sales in Beijing, Shanghai and Shenzhen dropped as much as 70 percent in May as real-estate developers delayed offerings following government tightening measures, the state- affiliated Shanghai Securities News reported on June 1.
(To save a copy of the chart, click here)
To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net
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