The second largest economy can have a profound effect on the ebb and flow of commodities and as such, China’s efforts to prop up its economy can help lift commodities moving forward.
The headwinds have certainly been blowing in China’s direction in 2022. Aside from the global inflation the country is already facing, a surge in Covid-19 cases once again forced lockdown restrictions that put a stranglehold on its economic production.
To add to that, the country is still trying to climb out of a deep hole spurred by the real estate development crisis in 2021. Real estate comprises a sizeable amount of China’s economy so this issue alone is more than enough to deal with.
The government is already doing what it can in order to turn the real estate sector around, such as implementing fewer underwriting restrictions for prospective real estate purchasers when obtaining a loan. On the development side, loan extensions are helping developers to meet their obligations.
Whether or not these measures make tangible progress is anyone’s guess, but they are a step in the right direction. However, analysts note that more will need to be done in order to shore up the market from a fundamental perspective.
“This really is a temporary relief in terms of the developers having to meet less debt repayment needs in the near future — a temporary liquidity relief rather than a fundamental turnaround,” said Hong Kong-based analyst Samuel Hui, director, Asia-Pacific Corporates, according to a CNBC report.
“The key is that we still need the fundamental underlying home sales market to improve,” Hui added further.
Broad-Based Commodities Exposure
If China, can get its real estate sector back on track, the positive effect on the economy could also spill over into commodities demand. As such, investors looking to gain commodities exposure can look to exchange traded funds (ETFs) like the Teucrium Agricultural Fund (TAGS ).
Whether it’s for a continued inflation hedge or to simply diversify a portfolio with more alternative assets as commodity prices push higher, a broad-based fund like TAGS is worth considering. When it comes to commodities exposure, most investors may think of oil, but agricultural exposure can also provide more commodities diversification.
For investors looking for agriculture exposure who don’t know where to start, Teucrium can fill a void, offering investors an easy solution. Getting exposure to commodities doesn’t mean investors have to hold various positions.
Investors can have it all in the convenience of TAGS. The fund combines exposure to corn, wheat, soybeans, and sugar through other Teucrium ETFs that focus specifically on these commodities, essentially offering investors a fund of funds.
The fund includes the aforementioned Teucrium Wheat Fund (WEAT ). To get that broad exposure, TAGS also includes the Teucrium Corn Fund (CORN ), the Teucrium Soybean Fund (SOYB ), and the Teucrium Sugar Fund (CANE ).
For more news, information, and analysis, visit the Commodities Channel.