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Quarter-End Insights

Basic Materials: A Real Estate Cloud Over China--and Many Commodities

Chinese real estate, a big driver of demand for industrial commodities, is likely to weigh on the country's GDP growth in coming quarters.

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  • The basic materials sector continues to trade very close to our fair value at a median price/fair value of 0.98 compared with a market price/fair value of 1.02.
  • Improved headline GDP in China comforted many investors. It shouldn't have. While China's GDP figures don't yet reflect real estate's troubles, they are likely to soon.
  • Lower corn and soybean prices in North America will put some near-term pressure on crop input producers. The long-term outlook for these companies looks more promising given our view of food consumption in emerging markets.
  • Declining recycled fiber prices will probably result in further weakness in containerboard prices.


Jeffrey Stafford does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.