Good news out of China

On Wednesday, the Taiwan stock market posted its biggest gain in 17 years after China Mobile (NYSE:CHL) bought 12% of Taiwanese telecom Far EasTone. The deal was worth $529 million, but the ramifications are much bigger. 

That’s because China and Taiwan just signed trade deals that allow Chinese institutional investors to buy Taiwanese stocks for the first time in 60 years. 

China Mobile is a state-run company. That Taiwan has allowed it to buy into one of Taiwan’s largest telecom companies represents a dramatic shift in China-Taiwanese relations. And this new relationship could prove to be an economic powerhouse in the making. 

*****The latest manufacturing data from China is showing improvement. That’s in part due to China’s stimulus efforts, which are more direct and immediate than those from the U.S. It also helps explain the strength we’ve seen lately in steel, copper and even oil. 

From a commodities standpoint, China is helping lead the global economy out of recession. 

The U.S. is doing its part, too. Manufacturing is still in decline, but is showing improvement for the third straight month. In fact, the ISM Manufacturing Survey is just one point away from moving out of recession territory. 

Companies have done such a good job of cost-cutting and scaling back production that the chairman of the ISM says business inventories are too low. That means that even without an uptick in demand, manufacturing is likely to continue to improve. 

*****If you guessed that good economic news from China and the U.S. would mean higher oil prices, then you won’t be surprised that oil is up over $53 a barrel. 

That’s good news for Graham Corp. (AMEX:GHM). I recommended Graham Corp. to Daily Profit readers on March 19 at $9.33. It’s up 32% since. 

And don’t forget that improvements in manufacturing are benefiting shipping companies, too. 

That’s it for today. Have a great weekend and I’ll talk to you on Monday.