The big news that's come out during the past week or so has been about China's resurgence. We’ve been talking about the end of COVID-19 and the rise of China for so long we wondered if they were ever going to happen.
Well, it turns out that China has returned and, according to data released last week, it would seem the country is coming in fast. Sales and stocks of European luxury goods, Chinese airlines, and European oil tanker companies are flying.
According to Forbes:
In the first quarter, China’s gross domestic product (GDP) grew a healthy 4.5% year over year, exceeding consensus. Retail sales in March jumped 10.6% year over year, a pace unseen in two years. As a result, the Citi China Economic Surprise Index, which measures data surprises relative to market expectations, hit a 17-year high. UBS Group raised its 2023 GDP forecast to “at least” 5.7%, with analyst Patricia Lui writing that “consumption will remain the main driver of China’s recovery this year.”
Forbes goes on to say that while airline traffic remained at 22% of 2019 levels in March, it is growing fast and will hit near 60% by midsummer, potentially going on to end the year at new highs.
This is good news for hawkers of European luxury goods. LVMH hit $500 billion in terms of market cap yesterday. Hermes and Kering are also doing well due to the Chinese middle class wanting to show off.
Chinese airlines like Chinese Southern Airlines (SGX: ZNH) are also ahead of the game on bookings, and fundamental to all this renewed growth is oil. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Oil Prices up on China Travel
Oil prices were up yesterday on optimism for travel during the Chinese May holidays, which cover five days ending on May 3. Overseas bookings were up as many people want to get out and see a bit of the world. Furthermore, new data from January and February pointed to more throughput in Chinese oil refineries with demand highest for jet fuel and gasoline.
Many pundits believe oil demand in China will hit records this year. As you know, China imports 90% of its oil and is the largest importer of oil in the world. This is good news for those of us who own oil tanker stocks.
China is now a big buyer of cheap Russian oil and diesel, which must sail halfway around the world to be used. More miles and higher demand equate to larger profits and higher prices in shipping tanker stocks.
The market thinks so as well. About 10 of these stocks were up between 6% and 9% today, jumping across the board.
But wait, it gets better. A few weeks ago, OPEC announced it was cutting production by over 1 million barrels of oil per day. This just reinforces the fact that China must go to North and South America or Russia for its energy needs.
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All the best,
Christian DeHaemer Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
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