China's growth picks up

Other Asian economies are also reporting numbers that show improving growth. The news has spilled over into trading in commodities.

By Jim J. Jubak Nov 2, 2012 1:29AM
Image: China (Brand X/SuperStock)Yet more data emerged Thursday signaling that China hit a growth bottom in September.

The official Purchasing Managers Index from the National Bureau of Statistics showed an expanding economy with a reading of 50.2 in October, up from 49.8 in September. In this survey, anything above 50 indicates an expanding economy.

China's economy expanded at a 7.4% annual rate in the third quarter, the slowest rate in three years, but month-by-month data showed September picking up strength after a weak August. This week, Bank of America raised its estimate for China’s fourth-quarter GDP growth to 7.8% from 7.5% and Nomura Holdings projected a rebound to 8.4%.

It's always good to put on your cynic's hat when looking at China’s economic data. And with the National Party Congress set to install new leadership next week, skepticism is certainly in order.

But other Asian economies with close links to China's economy are also reporting numbers that show improving growth. The Purchasing Managers Index for Taiwan, for example, rose to its highest level since June. Korea’s PMI, which had dipped in September, climbed in October.

In the United States, the Institute for Supply Management's Purchasing Managers Index for the manufacturing sector climbed to 51.7 in October, marking a second consecutive monthly increase. The index had tumbled in each month from June through August.

Not surprisingly, the Shanghai Composite Index rose in overnight trading by 1.72%. Hong Kong’s Hang Seng Index climbed 0.83%.

That economic and stock market news out of China has spilled over into trading in commodities sectors such as coal, copper, and iron ore. (Faster growth in China means higher demand for commodities.) Coal-miner Peabody Energy (BTU) closed up nearly 5% Thursday, while Freeport McMoRan Copper & Gold (FCX) rose 4.2%. Brazilian iron-ore miner Vale (VALE) was up 3%. (Freeport McMoRan is a member of my Jubak's Picks portfolio.)

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of Freeport McMoRan as of the end of June. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

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