China announced a major economic and financial plan to boost economy and markets. The question that investors and traders should ask is who is going to win or lose by this plan. Thus, the article titled: Stock bond imapcts of China $586 billion Bailout (winners and losers).

Impacts are (Pay attention to 2):

1. Risk appetite should return or at least risk fear should reduce, therefore less volatility, and more initiation of carry trades such as EUR/JPY.

2. But the US may suffer from this. To see why, one should ask how will China finance this plan? They would either print money at home, and/or buy less of US bonds and/or sell US bonds.

Therefore the impact on the credit market and US consumer will be negative, as part of this plans will essentially come back to the US in the form of exodus of dollars towards China or at least less US dollars coming back to the US from China to be invested in bonds or in buying other assets.

3. China will likely put money in infrastructure as they do not possess yet high technology expertise.

The effect of this is that Steel stocks should rise.

Energy stocks should also rise, as a stimulation of China means consumption of energy, and therefore more money for energy stocks.

If you are a stock investor, steel and energy should be an area where you can play the China boost plan.

4. A loser would be the Chinese people as they wills see more inflation if China finance the boost by increasing their money supply.

5. As discussed above, US and Chinese citizens will be hit by higher borrowing costs for US, and by inflation in China. Citizens are last in chain, and always pay the final bill.


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