Baltic Dry/Shanghai Composite Divergence

The Baltic Dry Index measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea.  Many look to the Baltic Dry Index as a leading indicator, and in recent years, its move has been fairly correlated with China's economy and the Shanghai Composite.  As shown in the chart below, China's equity market and the Baltic Dry Index had huge rallies from the end of 2005 to the end of 2007.  They also had huge declines after they peaked late last year.  Since late January, however, the Baltic Dry Index has been climbing while China's Shanghai Composite has been falling.  This divergence suggests that China's equity markets might be getting a little overdone on the downside at least in the short term.

Comments

[sbenard]

Is there still no ETF for the Baltic Dry Index?