China on Thursday and Friday announced a spending plan
worth $158 billion on setting up 60 infrastructure projects to shake the
economy out of its worst slowdown in three years.
The government set out elaborate plans to build ports,
highways and airport runways. The projects will be rolled out over the next
several years. The government is not describing it as a stimulus package, but
analysts are viewing it in that light and expect it to renew optimism i the
economy.
The announcement had the effect of fuelling a rally in
the local stock market which rose more than 4 percent in early trades on
Friday. Investors are hoping that the rally continues as the world’s fastest
growing economy has been caught in a sluggish bind for the last two years.
In the second quarter of 2012, China's economic growth
fell to 7.6 percent, the lowest in three years, while economic data in recent
months has pointed to a steeper slowdown in the current quarter.
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Crucial economic indicators for the month of August
will be published on Sunday and economists are expecting it to report lower
industrial output compared to previous months.
Policy makers in China have been cautious about
spending plans and measures to stimulate the economy as they do not want to get
caught by a situation of overheating as happened in 2009.
China's National Development and Reform Commission
approved 25 urban rail projects, 13 highway construction projects, seven
waterway projects and nine waste water treatment plans.
The coal and Steel sector got solids boost from this news
with Market Vectors-Coal ETF(NYSEARCA:KOL) soared 5.40% to $23.43 and Market
Vectors Steel (ETF)(NYSEARCA:SLX) rose 5.50%.
Some specific stock winners were Alpha Natural
Resources, Inc.(NYSE:ANR) up 0.99 (16.75%), Peabody Energy Corporation(NYSE:BTU)
2.31 (10.79%), Arch Coal Inc(NYSE:ACI) surged +0.50 (8.20%) and Walter Energy,
Inc.(NYSE:WLT) climbed 2.62 (8.20%).
In The Steel Sector, United States Steel
Corporation(NYSE:X) soared 1.68 (8.75%), AK Steel Holding Corporation(NYSE:AKS)
rose 0.41 (7.64%), Cliffs Natural Resources Inc(NYSE:CLF) added 5.05 (14.49%)
and Steel Dynamics, Inc.(NASDAQ:STLD) gained 0.38 (3.18%).
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