Our Technical Reports

Transcription

1 BALTIC DRY INDEX (BDI) Our Techniicall Reportts Our Technical Reports Daily Technical Report Morning Technical Report Daily Technical Report Weekly Technical Report Morning Technical Report Sectoral Technical Report Weekly Technical Report Stock Specific Report Sector Specific Technical Report Technical Reports on Global Markets Stock Specific Report Technical Reports on Global Markets

2 BALTIC DRY INDEX:- The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange not restricted to Baltic Sea countries; the Index tracks worldwide international shipping prices of various dry bulk cargoes. The index provides "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a time charter and voyage basis, the index covers Handymax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain Historical origin:- The BDI traces its roots to the Virginia and Baltic Coffeehouse in London's financial district in 1744 How it works:- Every working day, the Baltic canvasses brokers around the world and asks how much it would cost to book various cargoes of raw materials on various routes (e.g. 100,000 tons of iron ore from San Francisco to Hong Kong, or 1,000,000 metric tons of rice from Bangkok to Tokyo). The index is made up of an average of the Baltic Supramax, Panamax, and Capesize indices. These indices are based on professional assessments made by a panel of international ship broking companies. Why economists and stock markets read it:- Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand). In other words, small fleet changes and logistical matters can crash rates. The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, metallic ores, and grains. Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.

3 The BDI is based on US dollars, so it is also influenced by changes in the value of the US dollar.

4 Baltic Exchange Dry Index (BDI)& CRB Index (yellow) From the above chart we can see that CRB index and BDI moves in sync with each other most of the time. As we know that Energy products, base metals constitutes nearly 30% weightage in CRB index, so whenever there is any down turn in the economy it straight way reflects in the prices of energy products and base metals thereby in CRB indices.

5 Baltic Exchange Dry Index (BDI)& Crude Oil (red) From the above chart we can see that BDI has an absolute co relation with crude oil. As we know the demand of Crude Oil is directly co related with the state of the world economy there by whenever the economic situation improves the demand of crude oil goes up so as the BDI and vice versa.

6 Baltic Exchange Dry Index (BDI)& Copper (brown) "Logarithmic Graph" From the above chart we can see that unlike CRB commodities index, Crude Oil, Copper too has an absolute correlation with the BDI and moves in tandem with the BDI.

7 Baltic Exchange Dry Index (BDI)& Gold (gold) "Logarithmic Graph" In the following chart it could be seen that since the year 2002 Gold went through a secular up trending bull run which is still in force and it had made life time high recently. Further it could be observed that till 2008 most of the times there had been correlation of Gold with BDI,but there had been serious decoupling in their prices since Feb 2008 once the Sub Prime problem came into play which was further followed through the Sovereign debt problem in Euro Zone as Gold became the Safe Haven buying amidst all uncertainties.

8 Baltic Exchange Dry Index (BDI)& SP500 (green) From the above chart we can see that from the second half of the year 2005 S&P 500 has gone up in tandem with BDI till the onset of the bear market in the early There after again BDI has led the recovery since mid 2009 and S&P followed the trend. Thereafter it started correcting again since May 10 along with BDI.

9 NOTE: This report is made on the charts as on 01 Jul 10, when the value of BDI was 2501.There after in the last 10 day s it has slipped nearly 20% and presently trading just below 2000 mark. In line with the erosion of BDI value S&P has also lost considerably during this period (till 4 th of July) and crude too tumbled badly during this period. Here it is worthwhile to note that previous week (ending 10 th of July) major global stock indices has bounced back very sharply also the prices of base metals has gone up to some extent, in spite of that BDI sought lower levels and breached 2000 mark previous week to have the weekly closing at 1902 mark. The constant erosion in BDI value definitely shows some sign of slowing of world economy at this point of time, going forward, it will be very interesting to note the correlation of BDI & global stock market.