As an example of how interconnected the global economy is,
international real estate stocks are hoping Federal Reserve
Chairman Ben Bernanke will initiate stronger economic stimulus
measures when he speaks this Friday at the economic policy
summit in Jackson Hole.
[caption id="attachment_70234" align="alignright" width="300"
caption="Suburban housing in Heibei, China"]
International real estate stocks Xinyuan Real Estate, (
), a Chinese home builder, and Gafisa SA (
), a Brazilian home builder, have both rallied in 2012. Xinyuan is
up by 76.47% for the year. Gafisa is up by 45.26% for the last
quarter of market action,
posting a profit for the most recent quarter
Before the recent rebounds, each had suffered tremendously from
the declining economic growth in their home countries.
International real estate activity is picking up, with
markets in Asia expanding
Based on the recent stock market rally, traders are betting on a
fresh round of quantitative easing (QE3) or some similar policy
initiative more forceful than Operation Twist, the selling of short
term securities to buy those with a longer term. This is seen as a
potential salve to falling economic growth in the United
States with unemployment rising. Exports to the U.S. are very
important for the economies of China and Brazil, particularly that
of the People's Republic.
About 40% of China's GDP is based on exporting to the United
States and Europe. Much of the Brazilian economy hinges on
exporting iron ore and other products from Brazil. As Europe is in
a recession, a strong demand for goods from the People's Republic
is critical for both the Brazilian and the Chinese economies.
To stimulate the demand from the United States needed for the
economic health and real estate sector of of China and
Brazil, more help is needed from central banks. Bernanke has
promised to maintain a low interest rate environment until at least
2014. As these low interest rates make homes more affordable by
keeping mortgage costs down, home builders benefit.
But Gafisa and Xinyuan Real Estate need strong local economies.
The entire international real estate sector does: low interest
rates can only do so much. For that, demand from the U.S. must be
strong so the export sector in China and Brazil can provide the
jobs needed for workers to buy homes.