The EGShares China Infrastructure ETF (NYSEArca:CHXX) rose 3.8
percent Friday, along with a roster of China-focused ETFs, on news
that the Chinese government has taken another step toward
stimulating its slowing economy, this time through a massive
investment in infrastructure.
China's National Development and Reform Commission approved $157
billion worth of infrastructure projects as it looks to spark new
growth in an economy that has contracted now for six consecutive
quarters, according to a report from Reuters.
The move came just days before another round of economic data
expected this weekend could confirm-if expectations are right-that
China's economy is indeed in slowdown mode.
China is the world's second-largest economy, and slowing growth
there is already rippling around a global economy currently on
shaky ground thanks to Europe's debt crisis and lagging economic
growth in the U.S.
CHXX, which has lost more than 10 percent of its value in the
past six months alone, jumped nearly 4 percent-a move that stands
out considering the broad stock market was largely unchanged. The
Dow Jones industrial average closed 0.11 percent higher after
trading lower most of the day Friday, while the S&P 500 was up
0.40 percent. The Nasdaq also was practically unchanged after
hitting its highest level since 2000 on Thursday.
"While the need for additional infrastructure spending in China
is well known, it became clear overnight that investors were seeing
this week's announcement as a catalyst for renewed commitments,"
Emerging Global Advisors' head Bob Holderith told
"The challenge for many investors is access to the theme," he
added, noting that ETFs, like CHXX, have helped investors tap into
The Global X China Industrials ETF (NYSEArca:CHII) and the
broader-in-scope PowerShares Emerging Market Infrastructure ETF
(NYSEArca:PXR) were also among the day's top performers, with gains
of 4.28 percent and 2.8 percent, respectively.
PXR holds China as its largest country allocation, at more than
17 percent of the portfolio.
But the spillover also benefited the materials sector,
particularly base metals funds. China is the world's largest steel
producer and also the largest consumer and importer of the base
ETFs like the SPDR S&P International Materials Sector ETF
(NYSEArca:IRV) and the iShares S&P Global Materials ETF
(NYSEArca:MXI) were also up sharply, with IRV up 4.2 percent and
MXI up 3.2 percent on the day.
Nearly half of MXI's portfolio is tied to base metals, with
companies like BHP Billiton and Rio Tinto among its top holdings,
but China is nowhere in the fund's top 10 country allocations.
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