The Domestic Demand Side of China
A big chunk of th stimulus was spending on infrastructure improvement. It’s estimated that infrastructure spending in
For the past 22 years, millions of rural Chinese have streamed into the country’s burgeoning cities in search of work and greater opportunity. At the end of 2008, just over 46 percent of
And beyond the percentages, the sheer number of people you’re talking about in
It’s no surprise then that infrastructure spending in
Unfortunately, the securities of many of the key companies involved in those projects are difficult, if not impossible, for US investors to purchase. But this is precisely why the domestic demand economy will bolster
INDXX
Real estate management and development names account for 22.7 percent of the portfolio, and the sector that should prove quite profitable over the long term.
More immediately, the central bank’s moves to clamp down on lending should cool real estate prices. Although higher lending rates have made it easier for homebuyers to securing financing, affordability measures indicate that homeownership is well within reach of most households. That should provide broad support for real estate prices even if price growth slows in hot markets.
Railroad stocks also figure prominently in the ETF’s portfolio, with a position in China Railway Group (
Given the huge distances involved in moving goods, the bulk of
China Railway primarily works on the construction side of the business. In that capacity, the company is involved in several major projects, including a $17.6 billion passenger line being constructed across
The ETF is lighter on names related to airports and seaports as well as roads than you might expect. That being said, it’s an excellent way to play
If you’re interested in buying in, check the fund’s net asset value and use limit orders to purchase shares; trading volume hasn’t picked up yet for this newly launched fund. But it’s currently the best way to play Chinese infrastructure spending.
Infrastructure spending isn’t just a Chinese story though—it’s a global mega-trend as the strong pace of growth and urbanization continues around the world. iShares S&P Global Infrastructure (NYSE: IGF) is a good choice for if you want to play the broader trend.
Benjamin Shepherd is co-editor of Global ETF Profits.
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