The Chinese Real Estate Market—Hopes for Teak Investment Portfolios

The Chinese Real Estate Market—Hopes for Teak Investment Portfolios

The Coronavirus epidemic has only exacerbated the economic stagnancy that had impacted the world since the later part of 2019. Amid the US Stock Market crash, oil price wars between Russia and Saudi Arabia and financial market crashes around the world—a lot of people are wondering how to sustain their portfolios in these trying times. Considering depreciating currencies around the world, the $3.5 trillion loss in the American financial markets and massive economic instability throughout Europe, it’s safe to say that we should look for alternative investments.

Since the Covid-19 outbreak, the resulting crash in conventional investment returns, commodities seemed to have come out as a popular alternative. Gold prices continue to rise as people move into the safe-haven asset to reach a value of $1772.94 (June 29) an ounce—this is crowding out many people in the market, more so since gold shortages have also hit the markets. This has set into motion a chain of events where people are wondering where they can invest their money in a time like this.

One very valuable investment option is teak, because it’s one of the few commodity markets that haven’t budged as much in response to the Coronavirus scares. A major reason for that is the faith that people seem to have placed in the real estate market in China and the lukewarm effects of the Coronavirus on the Indian real estate market. 

Considering the fact that these two countries are two of the largest buyers of teak in the world, teak prices have remained relatively stable so far. There’s a possibility that the EU might shift its teak imports from Indonesia to other parts of the world—ever since Indonesia removed regulations for teak export. If you move your money into Central American teak plantations, it’s very likely that you’ll remain safe from the financial upheaval brought about by the Covid-19 outbreak.

Why Was Teak Ever a Lucrative Investment?

Teak hardwood was basically the gold of hardwood throughout most of the world because it grew in some very select regions throughout the world. The vast majority of the world’s teak came out of Myanmar, and a collection of South East Asian countries like Indonesia and Malaysia. Until recently, Myanmar had banned teak export to try to clamp down on the effects of deforestation resulting from teak trading around the world. With the gap in global teak supply chains, the hardwood had generally high prices across all global markets.

Much of the demand for teak originated from China and India, where teak was widely used as a construction material in their booming real estate markets. Until before the coronavirus outbreak, these two countries had thriving real estate sectors with huge local and international demand alike. This market was so huge that the demand from these densely populated regions kept the prices for teak generally high. When you combine them with the demand for teak from places like Europe and the US—to be used in furniture, and yacht building—teak remained a fairly valuable commodity for years.

Why is Teak Demand Unchanged During Covid-19?

While economic activity slows down throughout the world, affecting the industries that relied on teak as raw material, the demand is buoyed by hopes from the Chinese real estate market. According to the latest reports from leading investment firms in China, it’s forecasted that real estate investments are bound to generate as much as 1.75 billion RMB over 2020—that’s with the recovery period effects from the Coronavirus still in place. 

As the first country (allegedly) to have successfully contained and overcome the Coronavirus outbreak, the Chinese government seemingly has found room to get back on the economic track. The government is trying to boost economic demand by introducing financial moves similar to that in the US, to enjoy relatively greater success than other countries.

The government in Beijing has pledged to widening the fiscal deficit to make sure that the economy manages to recover from the Coronavirus. It’s estimated that the reductions in the interest rates and the quantitative easing practiced by the Chinese Central Bank will release as much as 300 billion Yuan into the economy—which might explain the response of the real estate market.

With the response of the Chinese Central Bank, the real estate market is slowly beginning to return to normalcy as the country contains the virus outbreak. A lot of people are amazed at the response of Chinese real estate debt that has remained unchanged during this time and how Chinese construction companies sold $16.5 billion worth of offshore bonds in January. The reports seem to indicate that worldwide investors are showing greater faith in the ability of the Chinese to clamp down on the impacts of Covid-19, restoring confidence in the safe-haven real estate in the country.

Considering the ties of the real estate market in China to global teak markets, it’s very likely that teak prices around the world are bound to remain stable throughout 2020. Since the EU is also looking for a new place to import its teak from, there’s possible room to fill the supply gap to the entire European continent as well.

Assuming that India manages to clamp down on the Coronavirus like China, and if teak demand from the EU remains steady— teak could be a great investment option in a time like this. With your investments in teak, you can cushion the blow from losing investments in other areas to come out relatively unscathed from this economic downturn.

Conclusion

In a time that’s characterized by uncertainty and economic instability, you need to make the right moves to ensure that your portfolios aren’t buried under the deluge. Considering the dynamics in global gold markets, teak could very well be the alternative investment that you’re looking for without falling for the hassle of running around looking for gold to buy.

There are plenty of easy ways for you to invest in teak plantations in Nicaragua, Panama and other Central American country which are slowly coming into their own as major stakeholders in global teak markets. Making a move into these countries can help you grow the value of your assets and make the most of what is truly a scary time in all of our lives.

I hope you enjoyed reading: The Chinese Real Estate Market—Hopes for Teak Investment Portfolios. For information on investing in Teak, please contact us HERE.

Here are some really great articles on Teak, enjoy!

The Ultimate Guide To Investing In Teak Wood

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Teak – The Best Species for Timber Investment

A Guide on How to Invest In Panamanian Teak 

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