Are you keeping a close eye on the Chinese stock market? If not, you might want to start paying attention after its recent surge. The mainland CSI 300 index experienced its best single day in over a decade, with an impressive 8.5% jump on Monday. This significant increase pushed the benchmark to its highest level since August 2023.
What caused this sudden surge? China unveiled a series of stimulus measures aimed at boosting its economy, including instructing banks to lower mortgage rates on existing home loans by the end of October. As a result, U.S.-traded ETFs linked to China, such as the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI), saw gains of 2.5% and 3.4% respectively.
Looking at potential beneficiaries of a rebound in China’s economy, Roth MKM’s JC O’Hara highlighted the materials sector. He noted that raw materials companies, including metals and miners, as well as chemical producers, saw a record increase of 3.4% last week. O’Hara pointed out that materials have the highest correlation among U.S. sectors to China and highlighted the strength in industrial metals like copper and zinc, which climbed 5.9% and 3.8% respectively last week.
Some materials stocks to watch, according to O’Hara, are O-I Glass, Corteva, and Freeport-McMoRan. However, investors should proceed cautiously in this sector as the longer-term downtrend from the relative line is still a concern.
In other news on Wall Street, Seaport upgraded Disney to buy from neutral, citing temporary soft Parks data and the potential for growth in direct-to-consumer profitability.
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