Materials Gain on Chinese Stimulus Plan
The Chinese government announced it would be embarking on a $157 billion dollar infrastructure investment program on Friday. The initiative, aimed at boosting China's struggling economy, has given some U.S.-listed stocks a significant boost.
Targeted at spurring growth in the currently lethargic Chinese markets, the program focuses on significantly improving and building out Chinese infrastructure. Included in the program are plans to build 25 new subway lines and 13 new highway projects. Also included in the $157 billion initiative are improvements to Chinese airports and a list of energy projects.
The announcement sent Chinese stocks soaring Friday as the Shanghai composite closed the day up 3.71 percent, while the Shenzhen composite rose 3.8% by the end of trading. The Hong Kong-based Hang Seng Index also jumped, closing the day with its second biggest rally of the year, rising 3.1 percent.
Most affected by the announcement were Chinese construction stocks. Ranging from tunnel builders to concrete companies, investors poured money into the equities, anticipating a slew of new contracts.
Also on the rise was Japan's Nikkei indices, which closed with its biggest gain in five months, up 2.2 percent.
The project didn't just affect Asian stocks however, U.S. Equities rose as well. Companies that could gain from the immense construction projects rallied. Shares of Caterpillar (NYSE: CAT) rose roughly 3.6 percent while John Deere (NYSE: DE) rallied about 1.99 percent
Other equities affected by the announcement were companies with copper exposure. Following expectations that the new Chinese projects would require a large supply of the metal, firms like Freeport-McMoRan Copper & Gold (NYSE: FCX) were up roughly 7.51 percent, while Southern Copper (NYSE: SCCO) rose about 4.97 percent. With the expectation that copper demand will jump in the near future, copper as a commodity might not be a bad play.
Shares of the Chinese ETF (NYSE: FXI) traded up 2.61 percent Friday around $33.58.
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