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Chart: China's economy shows signs of recovery

Chart: China's economy shows signs of recovery
February 8, 2016
Chart: China's economy shows signs of recovery

Rising demand for materials such as cement, copper, steel, PVC and zinc has several implications. Firstly, together with stronger consumer demand, it suggests that China’s economy has bounced back from the lowest point of its growth cycle. And secondly, it means that early cyclical sectors such as mining and steel should start to feel the benefits after a prolonged period of misery.

Haitong Research analyst Mathew Fernley expects steel prices to start recovering towards the second half of the year, prompting him to recommend building positions in low cost, market leaders such as Rio Tinto (RIO) and Antofagasta (ANTO).

Should this recovery play out, the under-fire industrial sector is then poised to benefit. That could include the number of engineers with big exposure to energy markets, including valve specialists Rotork (ROR) and Weir (WEIR). China contributed about 57 per cent of net global crude oil demand over the past decade, meaning renewed appetite there is capable of reversing the current supply-demand imbalance that’s left the value of Brent crude in the doldrums.

Source: Haitong Research, Bloomberg