Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
A reader actually sent me a link to this news story from the China Daily yesterday afternoon, but it appears to be hitting the U.S. press this morning – a new round of infrastructure spending (over a long period, 3 to 8 years) was announced in China to the tune of $136 Billion. While this is spread out over a long period of time and the immediate impact will be modest, the reaction in markets should be beneficial to the stocks that have not acted well the past few weeks (save yesterday) in parts of the commodity space and global construction. Keep an eye out on something like Caterpillar (CAT) which has acted poorly for weeks.
Shanghai itself shot up 3.7% overnight (not reflected in chart below) to back just below its 50 day moving average at 2127. Some of this is a delayed reaction the glow of the world stock market rally yesterday, and a portion due to this announcement as well.
Via Bloomberg:
- China approved plans to build 2,018 kilometers (1,254 miles) of roads, spurring the biggest stock- market rally in almost eight months on signs the government is stepping up stimulus efforts to revive economic growth.
- The government also backed nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades, according to statements on the website of the National Development and Reform Commission yesterday. No investment amounts were given.
- The announcements came a day after approvals for subway projects in 18 cities, an earlier rise in the railway- building budget and increases in land supplies in cities including Guangzhou, Hangzhou, Beijing and Shanghai.
- The approvals on Sept. 5 for a total of 25 new subway and inter-city rail projects are worth more than 800 billion yuan ($126 billion), or 1.7 percent of 2011 gross domestic product, according to HSBC. The spending will run from the second half of the year to 2018, it said.
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