(China yuan story updated for analyst commentary and stock-price movement.)
NEW YORK (
) -- Metals and mining shares surged Monday on word of China's yuan plans and the message that the move sends to the world: in a word, bullish.
Over the weekend, the government announced it would -- very gradually -- remove the yuan's peg to the dollar, allowing the currency to fluctuate, and likely appreciate, against the greenback. Essentially, China will go back to the policy it had in place before the global financial crisis. (In March, a Beijing central bank official surprised the world by saying that the country had been pegging the renminbi -- or "people's currency," of which the yuan is the basic unit -- to the dollar as a way to stabilize its money and keep its export prices down.)
Among economists and analysts, it appears to be unanimous that the moves will help China's domestic economy, decreasing its reliance on the export business. The strategy also suggests that China's monetary and fiscal authorities are optimistic about growth in their country; otherwise, they wouldn't have announced the policy shift.
For the last few months, investors have wrung their hands over a widely predicted slowdown in China's breakneck growth as officials there attempt to tamp down perceived asset bubbles, especially in real estate. Investors had removed money from metals stocks in anticipation of a so-called "hard landing" in the Chinese economy.
Now, however, the nation's planned currency policy "takes a little bit of that risk off the table, in investors' minds," said Mark Liinaama, a mining and metals equities analyst at Morgan Stanley.
Steelmaker shares in particular were surging Monday on the yuan news. That's because a rising yuan will increase the price of Chinese-made steel, boosting the competitive edge of rivals elsewhere in the world.
, the world's largest steelmaker, saw its New York-listed American depositary receipts were jumping 5.6% to $32.16 in midday trading Monday. Shares of
, meanwhile, were rising 5.2% to $46.19,
were advancing 4.8% to $14.57, and
were rising 2.4% to $14.31.
stock was gaining a more modest 1.5% to $42.09. But shares of
paced nearly all metals gainers, surging nearly 9% to $12.08 in midday trading Monday.
China's aluminum industry had been viewed as having the potential to disrupt the global market for the metal in a major way, with a significant amount of smelting capacity set to come online in the People's Republic. A stronger yuan, however, would eventually lift the marginal cost of production of aluminum in China. As with steel, this would benefit players elsewhere in the world.
Elsewhere in the metals universe, China's yuan moves will also eventually benefit multinational companies doing business with China's juggernaut industrial sector. Iron ore producers that feed the country's immense steelmaking industry, by far the biggest in the world, saw their shares jump Monday. New York-listed issues of
( RTP) were gaining 4.4%, 4.0% and 3.8% respectively, at midday.
Likewise, shares of
, which sells an enormous amount of copper to China, were rising 4.3% to $68.75.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.