Text: | Print|

Silk Road trade revival opens opportunities

2014-05-19 08:58 Shanghai Daily Web Editor: Qin Dexing
1

China's ambition of reviving the once-glorious Silk Road trade route is firing up enthusiasm for construction, building materials and other listed companies that stand to gain from new infrastructure opportunities.

Investors will no doubt be hoping that Chinese President Xi Jinping will be discussing the New Silk Road again with the president of Kazakhstan and other Central Asian leaders on the sidelines of this week's regional summit in Shanghai.

Xi first broached the subject on an official visit to Kazakhstan last September. In a speech at Nazarbayev University, Xi said China and Central Asian countries should join hands to build a Silk Road economic belt from China to Eastern Europe to promote trade, culture and investment.

Although details remain sketchy, investors have started to pile into shares of companies that might profit as the New Silk Road vision becomes reality.

Stellar performances by so-called "Silk Road shares" come against a backdrop of an 8 percent decline in the Shanghai Shenzhen CSI 300 Index this year, as investors fret about a slowing economy and a glut of new share offerings.

"The New Silk Road project will open up opportunities for China to export capital and technology, and transfer low-end industries to neighboring countries as it pushes forward economic upgrading domestically," analysts of CITIC Securities said. "It will also bring in huge consumption demand based on the vast population in Eurasia."

Infrastructure construction companies with operations in western regions of China are expected to be the most immediate beneficiaries, analysts said.

Shares of Xinjiang Urban Construction (Group) Co have shot up more than 45 percent this year on expectation it will benefit from infrastructure projects related to the ambitious plan. The price surged even though the company reported a 33 million yuan (US$5.3 million) loss for its first quarter. China West Construction Group Co gained more than 10 percent in the past two months.

Xinjiang Qingsong Building Materials & Chemicals (Group) Co also jumped more than 40 percent this year.

Analysts said the share prices reaction isn't surprising.

Unlock economic growth

Guan Qingyou, analyst with Minsheng Securities, said the New Silk Road would help to unlock China's economic growth potential in western regions as the frontier window to Central Asia.

The government is likely to quicken the pace of its railway expansion plans in western China, Guotai Junan Securities said. Rail links connecting cities in central China with border cities, and border cities with cities in Central Asian should be open to traffic before 2020, it said.

"Investment opportunities are emerging from infrastructure-related sectors such as railway construction, building materials and power facilities as city governments along the proposed Silk Road route intensify urbanization," said Xu Hong of China Dragon Securities.

The route, as currently planned, will start in Xi'an in central China and run west through the cities of Lanzhou, Urumqi and Khorgas, which is on the boarder with Kazakhstan. The route will then extend across Central Asia to Iran, Iraq, Syria and Turkey, before heading northwest to Bulgaria, Romania, the Czech Republic and Germany. The last leg will head south to Venice, an appropriate terminus given the colorful history of Marco Polo's travels.

Beginning in the Han Dynasty about 2,000 years ago, the ancient Silk Road was a network of trade routes that actively connected China and Europe for about 1,600 years.

Discussions along the proposed New Silk Road has already begun. During a meeting with Turkmenistan President Gurbanguly Berdymukhamedov in Beijing last week, Xi called for stronger ties in natural gas development and called for the early construction of a pipeline linking the two countries.

Other Chinese leaders who have visited Central Asia have also been talking up the prospects of the New Silk Road, and infrastructure agreements have already been signed with Romania, Serbia and Hungary.

The Ministry of Culture said earlier this month that China is planning a program to promote cultural ties with countries along the route in sectors such as entertainment, tourism, hotels and restaurants, and cultural heritage.

"Governments in Xinjiang Uyghur Autonomous Region and Xi'an have already pledged to beef up investment in tourism-related industries," Haitong Securities said in a note.

Comments (0)
Most popular in 24h
  Archived Content
Media partners:

Copyright ©1999-2018 Chinanews.com. All rights reserved.
Reproduction in whole or in part without permission is prohibited.