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Sep
10
Jonathan Yates
Will Bullish News from China keep the Bull Market Going?
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Financial exchanges around the world have been up in recent market action due to bullish economic news from China.

As the world’s largest consumer of many natural resources, such as copper (NYSE: JJC) and coal (NYSE: KOL), increased demand from China is critical for raising the prices of these products.  It is also needed to maintain price support for companies as diverse as Caterpillar (NYSE: CAT) and Yum! Brands (NYSE: YUM), the owner of fast food restaurant chains such as KFC and Pizza Hut, which are very popular in the People’s Republic of China

Even if China does not directly buy from the company, the nature of the global market lifts the market.

As an example, when oil prices rise, so should the value of oil firms around the world.  It does not matter if it is Exxon Mobil (NYSE: XOM), the world’s largest oil and natural gas firm, or small caps in the sector such as Americas Petrogas (TSX: BOE) and Octagon 88 (OTCBB: OCTX).  When oil rises, Octagon 88 and Americas Petrogas should benefit just as much as Exxon Mobil and other “Big Oil” firms.

Entire countries benefit, too, when China begins growing.

That is particularly true for resource rich nations like Australia and Brazil.  As the chart below shows, when the Chinese is economy is doing well as reflected by its exchange traded fund (NYSE: FX), the major Australian commodity firm of BHP Billiton (NYSE: BHP) does well, too.

It has been projected that China will soon have the largest economy in the world, as measured by consumption.  From that, publicly traded companies as diverse as Yum! Brands, Americas Petrogas, Caterpillar, Octagon 88, and BHP Billiton should all benefit.  Energy prices should stay strong, keeping the share price of Exxon Mobil robust, too.

For investors, what is good for China is good for the world’s economy, financial markets, and many publicly traded companies!



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