China’s central bank just made a major announcement…
In an effort to combat its recent economic struggles, the central bank cut interest rates by 50 basis points and also unveiled its largest stimulus package since the pandemic. This included pumping money into its economy and launching a plan to help with mortgage payments.
Now, folks are wondering if this will be enough to help China’s economy recover and reach the government’s 5% growth target this year. But if there’s one thing I know about that country, it’s that it’ll do what’s necessary to reach its goal – and take drastic measures if necessary.
Over the past two months, I’ve discussed the increasing odds of China providing some sort of stimulus to the economy. It was well received by the market. The news sent the Shanghai Composite Index up 4% to hit its best level of the month. The widely followed iShares China Large-Cap ETF (FXI) also climbed nearly 10% yesterday – closing at its best level in more than a year.
That’s positive news for China’s stock market. That said, many investors likely have China on their “do not invest” list alongside other “vice stocks” such as tobacco. If that’s your belief system, that’s OK with me.
But that doesn’t mean there isn’t opportunity in Chinese stocks. FXI is breaking out right now, and there’s plenty more upside ahead.
As much as most Americans don’t want to admit it, China is the leader in several major long-term investment themes. Ignoring them will only hurt your portfolio.
That’s why in my Early Opportunities Report newsletter, we have exposure to a Chinese company that trades in both the U.S. and China. I can’t give away the details here, but it’s breaking out to a multimonth high right now. And that’s just one winner in the world’s second-largest economy. There will be plenty more where that came from.
So don’t let your bias keep you out of this market. Now is the time to be invested in such a vital part of the global economy.
It’s also worth noting that China’s stimulus announcement had a direct impact on several sectors here in the United States.
Copper was one of the biggest winners – with futures rising 3.4% to their best level since July. This move confirmed that the metal’s summer pullback from an all-time high is over.
China is the biggest consumer of copper. And I’ve been telling my McCall Letter subscribers that the country would eventually stimulate its economy and boost the price of the industrial metal. That’s exactly what happened.
The Global X Copper Miners ETF (COPX) finished yesterday up 7% on the news and at a new two-month high. The United States Copper Index Fund (CPER) – a fund that tracks the futures price of copper – also saw a bump in price. Retail investors who are looking to ride the long-term trend in copper should keep both of these funds on their watch list.
Whether you’re for or against China, I highly suggest adding some exposure to copper to your portfolio. This will allow you to indirectly benefit as China’s economy improves.
Here’s to the future,
Matt McCallEditor, Market Insights
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