The EGShares China Infrastructure ETF (NYSEArca: CHXX) rose 3.8 percent Friday, along with a roster of China-focused ETFs, on news that the Chinese government has taken another step toward stimulating its slowing economy, this time through a massive investment in infrastructure.
China’s National Development and Reform Commission approved $157 billion worth of infrastructure projects as it looks to spark new growth in an economy that has contracted now for six consecutive quarters, according to a report from Reuters.
The move came just days before another round of economic data expected this weekend could confirm—if expectations are right—that China’s economy is indeed in slowdown mode.
China is the world’s second-largest economy, and slowing growth there is already rippling around a global economy currently on shaky ground thanks to Europe’s debt crisis and lagging economic growth in the U.S.
CHXX, which has lost more than 10 percent of its value in the past six months alone, jumped nearly 4 percent—a move that stands out considering the broad stock market was largely unchanged. The Dow Jones industrial average closed 0.11 percent higher after trading lower most of the day Friday, while the S&P 500 was up 0.40 percent. The Nasdaq also was practically unchanged after hitting its highest level since 2000 on Thursday.
“While the need for additional infrastructure spending in China is well known, it became clear overnight that investors were seeing this week’s announcement as a catalyst for renewed commitments,” Emerging Global Advisors’ head Bob Holderith told IndexUniverse.
“The challenge for many investors is access to the theme,” he added, noting that ETFs, like CHXX, have helped investors tap into focused segments.
The Global X China Industrials ETF (NYSEArca: CHII) and the broader-in-scope PowerShares Emerging Market Infrastructure ETF (NYSEArca: PXR) were also among the day’s top performers, with gains of 4.28 percent and 2.8 percent, respectively.
PXR holds China as its largest country allocation, at more than 17 percent of the portfolio.
But the spillover also benefited the materials sector, particularly base metals funds. China is the world’s largest steel producer and also the largest consumer and importer of the base metal.
ETFs like the SPDR S&P International Materials Sector ETF (NYSEArca: IRV) and the iShares S&P Global Materials ETF (NYSEArca: MXI) were also up sharply, with IRV up 4.2 percent and MXI up 3.2 percent on the day.
Nearly half of MXI’s portfolio is tied to base metals, with companies like BHP Billiton and Rio Tinto among its top holdings, but China is nowhere in the fund’s top 10 country allocations.