China’s economic growth will spur gains for “upstream” commodity producers, consumer companies and banks, according to JPMorgan Chase & Co.
“China will continue to lead the developing world and fuel the need for raw materials,” Jing Ulrich, Hong Kong-based Chairman of Global Markets, China at JPMorgan told reporters today in Shanghai. “Commodities will be a bright spot for the foreseeable future.”
The nation’s increasing dependence on commodity imports like iron ore, coal, copper and oil will drive global demand, Ulrich said. This will benefit natural resource producers in Australia and Latin America, while the government’s plan to expand spending in infrastructure and affordable housing will help boost the earnings of cement producers including Anhui Conch Cement Co.
A report this week may show China’s gross domestic product expanded 9.4 percent in the first quarter from a year earlier, according to the median estimate in a Bloomberg News survey. The economy grew 9.8 percent in the fourth quarter. Another report from the customs bureau yesterday showed exports and imports topped economists’ estimates last month, bolstering speculation growth isn’t being hurt by government measures to curb inflation.
Consumer companies such as Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, will maintain profit margins even as they face pressure from higher wage costs given the outlook for consumption growth over the next five years, Ulrich said.
Growing the country’s domestic demand is a key part of the nation’s strategic plan, Premier Wen Jiabao said in his annual address on March 5, confirming targets of 4 percent for full- year inflation and 8 percent for economic growth.
China’s lenders will benefit from higher net interest margins as borrowing costs rise, Ulrich said.
The central bank has boosted reserve requirements for lenders nine times since the start of last year to tame inflation and increased its benchmark lending rate by 1 percentage point since October.
“Chinese banks are extremely profitable,” said Ulrich.
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