Thursday, November 20, 2008
Baltic Dry Index hints at some healing for global markets
Thursday, 20 November 2008
Movement in the Baltic Dry Index in the past few days hints at some healing for the real economy and eventually for the markets. The Baltic Dry Index (BDI), managed by Baltic Exchange, is a daily average of prices to ship raw materials. The exchange maintains prices on several routes for different cargoes and then publishes its index. This index can be used as an overall economic indicator as it shows where the end prices are heading for items that use the raw materials that are shipped in dry bulks. "The BDI has declined 93 percent since hitting a record high of 11,970 last May, dropping to below 1000. The unusual drop was because of investors' panic amid the severe global financial crisis.
However, the pattern shows some healing for the economy, signaling a possible rally in the global markets in near term. A comparison between India's S&P CNX Nifty and Baltic Dry Index shows both are near bottoming out at current levels," said Ankit Sinha, CEO-Spark Advisory.
"The only one worth considering now is the Baltic Dry Index (BDI), which tracks the average daily price for shipping raw materials. If you're looking for a clear indication of a market bottom, just look for the BDI to start moving noticeably higher as it often predicts and moves in tandem with the equity markets," said Rodger Moore, head-strategy at DBM Capital Management.
The BDI offers a real time indication at global raw material and infrastructure demand. Unlike stock and commodity markets, it is totally devoid of speculative players. The BDI leaves no room Adapted from Economic Times India
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