NEW YORK (TheStreet) -- China's appetite for commodities and resources shows no signs of abating with the announcement that China Investment (CIC) will purchase $850 million worth of shares in Hong Kong-based Noble Group, which is focused on commodities.
The deal allows China to gain access to all parts of the commodity supply chain, from farm production to shipping to marketing, and provides it with exposure to the 40 nations that Noble Group does business in.
Earlier in the year, China went on a spending binge stockpiling raw materials, copper, iron ore and metals. Now it is diversifying into other areas of the commodity world.
Some experts believe China took this move because it fears its dollar-denominated assets will decline significantly in value. Lastly, there is the decoupling theory which sees China trying to reduce its ties to the United States.It's pretty safe to say that China is going to continue to buy resources around the world and extend out its shopping spree. An equity that have benefited and will most likely continue to from China's desire to accumulate resources is the broad-based commodity ETF iShares S&P GSCI Commodity Indexed Trust (GSG), which is up 36% from a February low of $22.09. It closed at $30.12 on Tuesday. An ETF that should reap the rewards of China's new partnership is PowerShares DB Agriculture Fund (DBA), which closed at $24.76 yesterday. It is up 10% from its March low of $22.50. When investing in equities, it is important to keep in mind the inherent risks involved. To help mitigate these risks, the utilization of an exit strategy is important. According the latest data from www.SmartStops.net, an uptrend in these ETFs could come to an end at the following price levels: GSG at $28.81 and DBA at $23.97. These price levels change and fluctuate as the markets change and updated data can be found at www.SmartStops.net.
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