How to Invest in China’s Xiong’an – from Barron’s
http://www.barrons.com/articles/how-to-invest-in-chinas-new-urban-creation-1492229730
where can I buy Hong Kong stocks for Xiong’an?
How to Invest in China’s New Urban Creation
Xiong’an should be a long-term play. Beneficiaries include China Evergrande, BBMG, and a little-known small-cap stock.
The office building of Party and Government Affairs of Xiong County, where China will create a new special economic zone. STR/AFP/Getty Images
Until very recently, the word “Xiong’an” would have generated no more than a confused stare from most Chinese.
The city in northern Hebei province, about 100 miles south of Beijing, is a rural backwater. That’s all set to change: The government plans to transform Xiong’an into China’s next business and commercial hub. Morgan Stanley thinks the city, whose population today is about one million, will attract up to $350 billion in investment in coming years. That could make it the biggest infrastructure project in the Middle Kingdom’s history. The initial reaction to the ambitious plans in China has been nothing short of frenzy: Nearby home prices and shares in local companies have surged in the past couple of weeks. Adroit stockpickers will have opportunities to get in on the action, but should proceed with caution.
It’s hard to understate China’s ambitions for Xiong’an, and commentators are comparing it to two of the country’s most successful experiments in urban capitalism. Until the 1980s, the southern city of Shenzhen was a hinterland bordering much more developed Hong Kong. Today, it is home to China’s second stock exchange and is widely regarded as the country’s answer to Silicon Valley. Shanghai Pudong was built up in the 1990s and is now China’s onshore financial hub. (Hong Kong is the offshore one.)
Xiong’an makes sense, too. The population of Beijing, the capital, is heaving at 20 million. Roads are choked with traffic, and the air is thick with poisonous smog. Rather than try to solve those problems, China instead wants to dislodge its massive state-owned companies, universities, and research facilities and move them down the road. That frees up a new, less encumbered Beijing to be purely the seat of government and its related entities.
Still, some observers are advising investors to adopt a patient approach in light of recent price hikes. It’s possible to put some stocks on a watch list and see if the price comes down once the frenzy eases. “I would urge investors to think for the long term,” says Tai Hui, JPMorgan’s chief Asia market strategist.
INVESTORS WHO DO FANCY trying their hand at the rise of Xiong’an have a few ways to do it. In a recent note, analysts at Citi picked out a few stocks that stand to profit. Hong Kong–listed property developer China Evergrande Group (ticker: 3333.Hong Kong) is arguably the best-known pick on its list. About 5% of its assets are in parts of Hebei province surrounding Xiong’an. This stock is up almost 40% in the past month alone. BBMG (2009.Hong Kong), a local cement maker, also benefits from a solid presence in this neck of the woods. Shares have skyrocketed 70% since the new year. Other names that investors should keep an eye on include drugmaker CSPC Pharmaceutical (1093.Hong Kong), cardboard manufacturer Nine Dragons Paper (2689.Hong Kong), ENN Energy (2688.Hong Kong), and Kingboard Chemical (148.Hong Kong), which makes laminates for electronics.
However, I think a little-known small-cap could be the most compelling way to play the Xiong’an trade. China Suntien Green Energy (956.Hong Kong), which runs wind farms, has a market valuation of just $800 million. The company is based in nearby Shijiazhuang and gets four-fifths of its revenue from Hebei province. Its yearly profits more than tripled in 2016. Yes, the share price has doubled in a year, but Suntien still trades at a historically low eight times forward earnings. It could turn out to be a bargain.
http://www.barrons.com/articles/which-stocks-win-from-chinas-new-mega-city-1491537945
Which Stocks Win from China’s New Mega-City
JPMorgan strategist Adrian Mowat analyzes the impact of the Xiong’an New Area on Chinese stocks.
Adrian Mowat – JPMorgan’s chief emerging markets and Asia equity strategist
Impact on Chinese stocks by sector
Property (Ryan Li)
We believe the excitement on the establishment of the Xiong’an New Area will persist for 3-6 months, and developers with high exposure to Hebei / Beijing will start highlighting their exposure and involvement to such.
Among major developers, Evergrande(3333.HK) currently has a tourism real estate project located in the area whileCountry Garden (2007.HK) has a very small one. Other developers with higher exposure to the “greater Beijing-Tianjin-Hebei area” include SUNAC (1918.HK),Beijing Capital Land (2868.HK), Beijing North Star (588.HK) and VAST (6166.HK).BBMG (2009.HK), together with its subsidiary Tangshan Jidong (000401.CH), is the largest cement provider in the area, but BBMG itself does not have much landbank in the area. However, we believe such trade will be quieter after 6 months, just like the Free Trade Zone in Shanghai. This is because unlike Qianhai & Pudong which are natural extensions of economically active Shenzhen and Shanghai respectively, Xiong’an is located much further away from the CBDs (100 km is about a 2-hour drive) with very minimal infrastructure & facilities today.
Industrial (Karen Li)
Names to benefit are traditional FAI plays, including construction companies, cement, construction machinery, Beijing-related names and so on.
Steel & cement (Wei Po)
In the cement space, regional players in Hebei will benefit the most. China National Building Material (3323 HK) also has a small exposure in Hebei.
For steel names, both Maanshan Iron & Steel (323.HK) and Angang (347.HK) have large construction exposure.
Utilities (Elaine Wu)
China water and waste treatment companies may benefit from an increase in infrastructure projects in the new district. Assuming Xiong’an could one day be the size of Shenzhen, this could translate to potential water treatment capacity of 5-6MM tons/day, or c20% of Beijing Enterprises Water’s total water treatment capacity.
China gas companies could benefit from higher gas demand in the region as the government mentioned this would be an environmentally-friendly district, hence, natural gas would likely be used as a fuel source.
Coal & renewables (Boris Kan)
In the coal & clean energy space, potential beneficiaries will be clean energy operators with high exposure to Hebei (better pollution control standards). China Suntien(956.HK) will be the biggest beneficiary (most wind power / gas assets in Hebei), and to a less extent Longyuan (916.HK) (8% of wind farm exposure to Hebei). There are no nuclear power plants in operation currently, but China National Nuclear Power (601985.CN) will have the first nuclear unit (Haixing) in the province by 2020. And there might be even more nuclear projects approved in the province going forward. If more distributed solar projects are built in Hebei, solar contractors like Singyes (750.HK) would benefit.
On the flip side of the equation, the Government might plan to shut down more coal-fired power plants in Hebei, and Datang Power (991.HK) has the highest exposure in the province.
For coal, Hebei has limited contributions to the nation’s total coal production and listed coal producers have limited exposure in the province.
Autos (Nick Lai)
Our analyst sees limited impact on the auto sector, as Xiong’an district would not be a main driver of auto demand. Great Wall Motor (2333.HK) is located in Boading and Tianjin cities – both within Xiong-An district. However, sales volume of Great Wall should be low single digits based on our forecast.
Premium car dealers which have relatively higher exposure in Northern China (including Xiong’an) could benefit. This includes Baoxin Auto (1293.HK, Neutral) which is top dealer for BMW in the district.
Oil & gas (Scott Darling)
Within China oils, we think Sinopec (386.HK) and Sinopec Shanghai (338.HK) will benefit from improved gasoline and diesel demand from construction and relocation activity.
— This is an edited extract from a longer research report by JPMorgan’s chief emerging markets and Asia equity strategist, Adrian Mowat, and his team.
