Market Overview

3 Sectors That Should Fear China

3 Sectors That Should Fear China
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China has the world's largest economy in terms of purchasing power. When it moves, markets can be crushed.

Even though China is not posting double-digit economic growth like it did before, shipping (NYSE: SEA), natural gas (NYSE: UNG) and coal (NYSE: KOL) should all fear the way the leadership is positioning the country.


China has established a target of having more shipping traffic sail its flag.

As China is the world's bigger consumer of many goods, it has a great deal of power in shipping. The country has already attempted to use this through contractual matters.

The shipping sector is just starting to recover: Guggenheim Shipping, the exchange-traded fund for shipping, is up nearly 20 percent for the last year of market action. Territorial moves on China's part could scuttle the recovery.

Natural Gas

China is also moving to increase its natural gas production.

Beijing has set forth a target of reducing pollution. A major part of that is increasing the usage of natural gas. That will not open markets for American natural gas because of logistical factors.

China has massive natural gas fields that are untouched. When producing, these could take away markets from national gas companies that are now operating.

For the last six months, United States Natural Gas, the exchange traded fund for natural gas, is off by more than 14 percent. This could mean the surplus of natural gas as the tension with Russia has only resulted in the price falling.


That also presents a poor outlook for coal.

China is the world's largest user of coal, as it is with so many other industrial metals. The country wants to do away with the pollution that coal brings.

That will decrease the demand for coal over time, which will crater the price even more. Market Vectors Coal, the exchange traded fund for coal, has fallen by 1.65 percent for 2014.

Posted-In: Long Ideas Sector ETFs Short Ideas Commodities Economics Markets Trading Ideas ETFs Best of Benzinga


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