Property Slump Worsens
The latest data showing China’s house price index fell to -3.2% in February confirms the property slump is getting worse. This small but significant acceleration from January’s -3.1% tells us that government support measures from late 2025 have failed to stop the decline. We should therefore maintain a bearish outlook on assets directly tied to Chinese construction and consumer confidence. This weakness is already hitting industrial metals, with iron ore futures on the Singapore Exchange falling 8% over the last month to trade near $108 a tonne. We saw this same pattern throughout 2024 and 2025, where property developer defaults crushed steel demand. Traders should consider buying puts on mining companies or shorting the Australian dollar, which last week touched a four-month low of 0.6510 against the US dollar. The negative wealth effect is also spreading, as evidenced by last week’s disappointing retail sales report which showed growth of only 2.9%. This suggests consumers are saving rather than spending due to uncertainty in the value of their primary asset. We see value in buying put options on Hong Kong-listed ETFs that track Chinese consumer and financial stocks for the coming weeks.More Stimulus Likely
We expect the People’s Bank of China will be forced to introduce more stimulus, likely putting downward pressure on the yuan. The offshore yuan has already weakened past 7.28 against the dollar this month, its weakest point in 2026. This reinforces the strategy of being long the US dollar against a basket of currencies exposed to Chinese growth. Create your live VT Markets account and start trading now.
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