The Chinese government is shifting its focus from investment spending into services spending to drive future growth. The EGShares China Infrastructure ETF (NYSEMKT:CHXX) is likely to tumble should we see the Chinese government pull the rug out from under the infrastructure sector. This fund is heavily weighted in industrial and basic material stocks, which would perform poorly as spending shifts to the services sector. Along the same lines, as a result of decreased infrastructure spending in China, the demand for copper would falter. Currently, 40% of the global copper demand comes from China’s industrial activity. Look for shares of the iPath® Dow Jones-UBS Copper Subindex Total Return ETN to trace falling copper prices. This fund is designed to provide investors with exposure to the Dow Jones-UBS Copper Subindex, which reflects the returns that are potentially available through an un-leveraged investment in the futures contracts of copper. The shift in industrial spending would be an effort to sustain the reasonable growth rates over the long term.
Should we continue to see an economic slowdown in the region, the above stocks should see weakness. Consumer discretionary stocks will be drawn down by decreasing wage growth and tighter monetary policies. The industrial and material names should falter as the government shifts spending from the infrastructure industry into the services sector to promote longer term growth.
The article Stocks to Watch on a Chinese Slowdown originally appeared on Fool.com.
Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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