The newly-created Commercial Aircraft Corp. of China is planning to assemble jets on their home turf in an attempt to lessen the nation’s dependency on Western-made planes – might the move put a dent in the aerospace and defense exchange traded fund (ETF) if it takes flight?
So far, China’s track record building planes hasn’t gotten any air. The first Chinese-made jet, the Shanghai Y-10, was retired five years after its launch because local airlines refused to purchase it, reports Chi-Chu Tschang for BusinessWeek. They preferred the more fuel-efficient Boeing (BA) and McDonnell Douglas jets instead.
Twenty years later, China is giving it another go; this time around the demand is stronger with more customers flying than ever, and the country is more motivated to keep profits in their homeland.
PowerShares Aerospace and Defense (PPA) has 7.1% in Boeing and is down 5.8% year-to-date. If the Chinese can get their plan off the ground, could it wind up in the fund?
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.