Headlines from major financial news outlets like the Associated Press and Forbes are all reporting that global stock markets rallied big-time on Wednesday on news that China is meeting to discuss a second massive stimulus package. Last year, the nation – the only country still growing, actually – issued a $585 billion stimulus package. We don’t have news yet on how big this next stimulus plan will be, but investors around the world are optimistic that it will help “limit the length and depth of the recession in the industrialized world,” writes the AP. China, of course, only wants to lift its own growth rates and keep its industrial engine humming. And it’s got a new strategy for doing just that… If you remember, last week I told you that China Investment Corp. (CIC) was shifting its focus from financial and real estate investments to natural resources. That means CIC is buying up assets in mining companies and oil companies around the world. China’s hungry eyes are looking hard at Australia, Latin America, and even Canada to secure natural resources. My colleague, Christian DeHaemer, editor of Crisis Trader and BreakAway Investor, told me this morning that Chinese buyers have already bought $70 billion worth of global resource assets this year, including the $19.5 billion it just spent on Rio Tinto (RTP:NYSE) assets I told you about last week. It also includes a $10 billion loan to Brazilian oil company Petrobras (PZE:NYSE). There’s a lot more money where this stuff came from, too, as China holds one of the world’s biggest sovereign wealth funds. This is a smart strategy for China, as it can secure much-needed commodity supplies at extremely low prices right now. It’s got the cash to do it. And it’s got the cash to spur domestic demand, too. It’s kind of a socialist industrialization, where the government is in effect subsidizing both supply and demand by pumping money into the system and spending reserves to cheaply acquire resources. But anyway you look at it, someone spending money right now is a pretty optimistic sign, and the markets are taking their cues. Latin American markets saw substantial jumps Wednesday morning, with Brazil and Mexico leading the way with nearly 5% increases. Some European markets were performing even better. Norway was up 6.23% Wednesday morning. And individual companies were basking in this confidence: Norway’s StatoilHydro (STO:NYSE) was up 9.33% Brazil’s Companhia Vale (RIO) was up 11.08% Australia’s BHP Billiton (BHP:NYSE) was up 9.07% Canada’s Petro-Canada (PCZ:NYSE) was up 7.04% Yesterday was a good day for resource companies, and many analysts are now brightening over prospects for the rest of the year. It’s like China’s buying the world at the discount store. Here in the Taipan Publishing Group’s office, I sat down with Christian and WaveStrength Options Weekly editor Adam Lass. Chris said, “China could own the world in five years, if it wanted. It stared $150 oil in the face and it’s doing things differently now.” Adam said, “It’s like Japan buying up world assets back in the ’80s, except it’s 1987, not 1986.” After the crash… buying on the cheap… buying the world. It’s going to be an interesting year in the resource sector. Rather than Western nations telling China to keep its hands off our assets – like the U.S. did with Unocal a couple years back – this time, companies are more than happy to entertain bids. Like Rio Tinto, which was up 11.47% Wednesday morning… I think commodities could be one of the best sectors this year, and certainly in 2010. Prices have been so depressed that stimulus money finding its way to resource companies can do a lot for share prices.
Bookmark
Email this
Hits: 30
Comments (0)
Write comment
