Miners Gain on Report of Chinese Fiscal Stimulus Plans
2022.07.07 19:35
By Geoffrey Smith
Investing.com — London-listed mining stocks rallied hard on Thursday after a newswire report suggesting that China is prepared to ramp up infrastructure spending again in an effort to revive an economy hobbled by Covid-19 lockdowns.
Antofagasta (LON:ANTO) stock, Anglo American (LON:AAL) stock and Glencore (LON:GLEN) stock all rose by between 6% and 7.8% as base metals prices reacted strongly to the report, which suggested that Beijing is resorting to a tried and trusted sort of fiscal stimulus. Iron ore heavyweights Rio Tinto (LON:RIO) and BHP Billiton (LON:BHPB) likewise rose by more than 4% each.
That tracked a similar bounce in futures for Copper Futures, Aluminum and Iron ore futures.
Bloomberg reported that the Chinese Finance Ministry is considering accelerating some $220 billion worth of debt issuance by local authorities from 2023 to this year, in order to support spending on infrastructure and other sectors. If confirmed, the move would be unprecedented.
Beijing officials are under pressure to do something to prop up the economy, given that President Xi Jinping has so far refused to countenance any cut to the official growth target of 5.5% for this year. Most independent bodies, including the International Monetary Fund, have cut their forecasts to around 4% due to the slump in demand caused by months of stop-start restrictions on mobility. Shanghai, parts of which were locked down for two months during the spring, has resumed mass testing of its various districts this week after finding evidence of a fresh outbreak.
This year’s business surveys have indicated that the country’s key manufacturing sector only posted growth in two of the first six months of the year, while consumer activity was hit hard by lockdowns.
The hit to consumers in particular from lockdowns has led many analysts to argue that Beijing would be better advised to target domestic demand with its stimulus policies rather than throwing yet more money at a sector already struggling to resolve a mountain of bad housing-related debts.
