China’s One Belt, One Road (OBOR) initiative potentially spans over 50 countries and reach 4.4 billion people in Asia, Africa and Europe. With an estimated US$4-8 trillion likely to spent on infrastructure projects, companies that are exposed to them have the potential to win significant projects.
The OBOR will focus on two key issues:
- address underinvestment and infrastructure deficiencies in emerging economies
- strengthen trade and regional financial flows
On SGX, there are close to 110 Chinese companies and many more that have the potential to benefit from these infrastructure projects in the region. We look at four stocks that have recently aligned their business to leverage on OBOR projects.
#1 OCBC (SGX: O39)
OCBC is Singapore second largest financial services group in Southeast Asia by assets and one of the world’s most highly rated bank. It is also recognized as one of the World’s Top 50 Safest Banks by Global Finance.
OCBC key economies includes Singapore, Malaysia, Indonesia and the Greater China region, it also has operations spanning Brunei, Myanmar, Philippines, Thailand, Vietnam, Taiwan, Japan, South Korea, Australia, the USA, and the UK. Many of these countries may be exposed to OBOR projects.
With its diverse offerings of commercial banking, specialist financial and wealth management services including from consumer, corporate, investment, private and transaction banking to treasury, management and stockbroking services, OCBC is likely to benefit from potential OBOR projects.
In its latest announcement, it also highlighted that one of its key thrusts is to “actively support Chinese corporates’ cross-border financing opportunities arising from BRI.”
#2 EC World REIT (SGX: BWCU)
EC World REIT was listed on the SGX in 2016. Its portfolio of six properties are located in Hangzhou, China and are mainly used for e-commerce, supply-chain management and logistics purposes.
Its properties include ports, warehouses and specialized logistics facilities that are primed to benefit from certain OBOR projects.
In its latest announcement, it highlighted that its sponsor Forchn will “put together a strong Singapore management team with the objective of expanding business footprint into the SEA (Southeast Asia) along the BRI (Belt, Road Initiative)”.
#3 Straits Trading Company (SGX: S20)
Straits Trading is an investment company with stakes in real estate, hospitality, resources and investments spanning Asia Pacific. The Group key holdings include an 89.5% stake in Strait Real Estate, a real estate investment vehicle; a 20.95% stake in one of the largest real estate fund managers in the region (including ARA Asset Management); a 30% stake in Far East Hospitality Holdings, one of the largest hospitality operators in the region; a 54.8% stake in Malaysia Smelting Corporation Berhad, a tin mining and smelting subsidiary.
With key stakes in major real estate focused companies, Straits Trading has highlighted that “BRI continues to make inroads into other markets outside of China, with government’s active pursuit of international rail projects”.
This could be seen as Straits Trading’s intention to get in on some of these projects that are spilling over into regions outside of China as well as potential rail projects.
#4 China Aviation Oil (Singapore) (SGX: G92)
China Aviation Oil is the largest physical jet fuel trading in the Asia Pacific region and the key supplier of imported jet fuel to China’s civil aviation industry. Its businesses include jet fuel supply and trading, trading of other oil products and investments in oil-related assets.
Its robust business, a state-owned enterprise in China and counting BP as a strategic investor, achieved a record high total supply and trading volume in 2017 as well as posted a record net profit for FY2016.
In its latest announcements, it highlighted that with the BRI “CAO is poised to capture the resulting opportunities and maintain a leading position in Asia Pacific through these new markets.” This points to potential expansion on the back of OBOR initiatives into more countries, which will likely lead to more business.
Leveraging On OBOR To Strengthen Your Investment Portfolio
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