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Why these seven words from China's Premier Li Keqiang have created a huge profit opportunity for you now

by , 01 April 2014

“China slowdown threatens global growth”

“China economy running out of steam”

“Chinese stocks fall on growth slump”

These are the headlines journalists have splashed across the media over the last few months. And they normally follow these up headlines with a story about how Chinese growth rates are slowing; and how this could spell economic disaster for China and the world. And, all this talk of a slowing China is driving down the prices of industrial metals like iron ore and copper.

But on Friday last week, China's Premier Li Keqiang said seven words that could change the fate of commodities… He said, “We will launch relevant and forceful measures.”

He was talking about the Chinese government's plans to stimulate the cooling economy by pushing ahead with its infrastructure investment of course.

And this government stimulus spend will pump up metal prices and drive your profits if you know where to invest...
When China slows, metal prices will fall

Like most things in this world, industrial metal prices move with supply and demand. And for the last decade, China’s been a major consumer of these metals like copper and iron. At times China consumes 40% of the entire world’s supply of these metals.

But the problem with China using so much of the world’s supply is when China’s growth slows, demand falls and there’s suddenly a massive oversupply of these metals. And when there’s too much supply, the price of these metals drops.

This drop had a knock on effect and saw the share prices of industrial metal miners dip.

But all hope is not lost…

As China builds infrastructure, you have an opportunity to profit

You see, the announcement that China will increase spending on infrastructure development will bolster metal prices. In fact, last time China announced stimulus plans in August 2012, industrial metal prices kicked up 10.5% in less than a month!

That’s because these large infrastructure projects that China will build – projects like railways, ports and harbours – require large amounts of these industrial metals. 

So the question is, how can you profit from this Chinese infrastructure spend?

And the answer lies in owning what China will need… And to do this, you want to buy the industrial metal miners.

And right now, you have a great opportunity to buy one of South Africa’s biggest.

Kumba Iron Ore (JSE: KIO) is a mining company specialising in industrial metals. And over the last few months, this share has fallen 20% on concerns of a Chinese slowdown. But with the Chinese government signalling it will support the economy of China, now is a great time to buy industrial metal miners like Kumba and profit as iron ore prices recover.

Until next time,

Here’s to staying ahead of the game.

Why these seven words from China's Premier Li Keqiang have created a huge profit opportunity for you now
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