Analysis | Transport, property stocks to gain from southern China’s Big Bay Area
The Big Bay Area, which encompasses Guangdong province, Hong Kong and Macau, will have a combined population of 100 million, with a 2016 economic output of US$1.36 trillion, ranking it as one of the world’s largest bay-area economies
The transportation and property sectors are set to become the winners of the Guangdong-Hong Kong-Macau Big Bay Area (粵港澳大海灣), a regional development plan that is most likely to be led by Hong Kong, analysts said.
“There are three world-class port cities in the big bay area, namely Hong Kong, Shenzhen and Guangzhou,” China Merchants Securities analyst Zhang Xia said in a research report. “The area is going to be a pivot to the ‘Belt and Road Initiative’ and will probably become the world’s fourth bay area” after Tokyo, San Francisco and New York.
Property and transportation stocks will be the major winners while more investment opportunities in industries such as tourism and financial services will emerge as the big bay area develops into a technology and financial hub in southern China.
Stocks that may benefit include Shenzhen Airport, Guangzhou Baiyun International Airport and Cosco Shipping Specialised Carriers, all listed on the mainland.
Hong Kong-listed China International Marine Containers Group and Shenzhen Expressway were also cited as potential beneficiaries.
Among port operators, the report cited Shenzhen-listed Zhuhai Port, Shenzhen Yan Tian Port Holding and Shenzhen Chiwan Wharf Holdings.
The Hong Kong-Zhuhai-Macau Bridge, which is expected to complete construction by the end of 2017, would reduce the driving time from Hong Kong to Macau or Zhuhai from three hours to a mere 30 minutes, largely enhancing the transportation capacity, Dongguan Securities analyst Huang Xiuyu wrote in a research report.
“According to experts, every 1 per cent reduction in the driving distance between Hong Kong and Pearl River Delta cities will lead to a 0.2 per cent increase in foreign investment for manufacturing and a 0.7 per cent gain for services,” Huang said.
The belt and road trade plan, unveiled in 2013, consists of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road.
The big bay area plan appeared three years ago and was, for the first time, mentioned in Premier Li Keqiang’s annual report during China’s legislature meeting in March. Analysts interpreted it as a sign that the plan had been elevated in its strategic significance to become a national strategy for the government.
The area, covering 56,500 square kilometres with an estimated population of 100 million, recorded US$1.36 trillion in 2016 gross domestic product, according to Dongguan Securities. It encompasses Hong Kong and Macau, as well as major cities in Guangdong province including Guangzhou, Shenzhou, Zhuhai, Foshan, Huizhou, Dongguan, Jiangmen and Zhaoqing.
“It’s a well-developed area already where large manufacturing and technology firms locate. We believe the economic growth will accelerate with government stimulus and completion of infrastructure construction, and the area will be abreast of the three biggest port areas globally,” Huang said.
For the property sector, China Merchants Shekou Industrial Zone Holdings, Shenzhen Zhenye (Group), Gree Real Estate, Huafa Industrial Zhuhai and Poly Real Estate Group would also benefit due to their land bank in the area, analysts said.
“By the end of 2016, China Merchants Shekou had 18 million sq metres of land bank, with 55 per cent in the big bay area,” Huang said.
Environmental stocks like plant engineer Shenzhen Techand, Ecology & Environment and Palm Eco-Town Development will also get a revenue boost from the State Council’s aim for the region to be developed as a pilot “ecological civilisation construction”.
With its US$1.36 trillion of GDP last year and US$1.4 trillion of exports and imports, the big bay area can already compete with the world’s three bay areas in Tokyo, San Francisco and New York.
The San Jose-San Francisco-Oakland area had a combined GDP of US$758.5 billion in 2015.
Substantial development of the Guangdong-Hong Kong-Macau Big Bay Area was coming, Zhang said.
