Hong Kong is eminently placed to contribute to, as well as benefit from, the grand plan to create a new economic zone in Hebei province, but efforts in that direction should go beyond stock market speculation, analysts said on Wednesday.
The weekend announcement of the Xiongan New Area, to be located roughly 100 kilometers southwest of Beijing, is expected to emulate South China's Shenzhen Special Economic Zone and Shanghai's Pudong New Area.
Stock markets in the Chinese mainland and Hong Kong may continue to benefit from the spillover effects. Already, shares of companies in sectors like infrastructure and construction have been rising in anticipation of huge projects in the new area.
The Shanghai Composite Index rose 1.48 percent to finish at 3,270.31 on Wednesday.
In Hong Kong, the benchmark Hang Seng Index as well as the Hang Seng China Enterprises Index remained flat at 24,400.80 and 10,365.32, respectively, after Monday's rises in related shares, which continued their good run.
Beijing-based BBMG Corp, whose flagship cement business has Hebei province as its largest market, saw its Hong Kong-listed shares soar 10.57 percent to HK$4.81 (62 cents), tracing a staggering 35 percent gain on Monday. The company's Shanghai-listed shares increased by the 10 percent daily limit.
Cement and steel makers, and companies related to railways and public facilities will likely gain momentum, analysts said. Infrastructure development in the area could entail investments of an estimated 4 trillion yuan ($580 billion) in the coming 20 years, UBS Securities Co said in a report.
Strong demand is foreseen for construction machinery, especially excavators and concrete machinery, Credit Suisse strategist Li Chen said.
Heavy economic activity in the area could reduce the region's dependence on polluting industries and help it become environmentally friendly, especially in the use of energy.
But stock market activity should not receive excessive focus, said Fielding Chen Shiyuan, Hong Kong-based Asia economist at Bloomberg Intelligence.
"The new area is more than a mere replica of the past successes. Hebei should aim high to introduce a market-oriented mentality, a feature that helped Shenzhen turn from a fishing village into the Chinese mainland's Silicon Valley," said Chen. "This is where Hong Kong could seek a bigger role by exporting its talents with market-driven thinking.
"There are many good lessons that Xiongan could learn from Hong Kong, and the city is well positioned to export its management expertise," Chen said.
