Main reference: Story in Securities Times
GREEN FIRMS, pharma plays, brokerages and construction listcos participating in China’s ongoing urbanization are all likely to improve this year, according to a market watcher.
The overall and to many degrees – continuing – restructuring of China’s economy will be the overarching theme for any "bull driving" to occur this calendar year on the Shanghai and Shenzhen bourses.
A Place in the Sun: Comtec focuses on the Ingots & Wafers segment of the solar value chain. Green firms like Comtec are likely to get a big boost from Beijing's increased emphasis on environment protection. Image: ComtecLike their predecessors, the new government leaders in Beijing are committed to help ease the growing income gap across the country – and the wealth gap between the coastal and inland provinces – by spurring demand and helping spur development in the hinterlands.
Furthermore, domestic demand will no longer be a theory but will by necessity become a practice as China’s traditional export markets in the West continue to struggle with their own respective economic troubles and remain mired in debt.
Finally and perhaps potentially the most uplifting for the largest number of shares is the ongoing urbanization theme.
Two years ago, China turned a major page in its five thousand year history and for the first time became a majority urban state, at least in terms of where its citizenry calls home.
Full solar panel assemblies are part of Solargiga's strategy to become a one-stop supplier. China's green push will also help Solargiga. Photos: SolargigaAnd with the constant flow of rural denizens to the cities in search of work – or dependents following their lead and seeking to live together as complete nuclear and extended families in urbran areas – these new arrivals bring with them a whole panoply of unique market needs.
Urbanization explains why three sectors of the above-mentioned industries are expected to outperform this year: green firms, pharmaceuticals and construction firms.
Going green
With ever increasing stress on clean water availability and ever sootier skies over China’s teeming cities, the flood of newcomers only puts more pressure on authorities to install clean air/clean water facilities as well as rely more on alternate forms of energy production.
Last year, the 18th National Congress in Beijing four months ago heavily promoted the themes of: “green development, recycling, low carbon emissions – to build a beautiful China.”
The new leadership is trumpeting the same things now and has already shown a desire to further boost spending on renewable forms of energy production including solar, hydro, wind and nuclear as well as more environmentally sustainable urban design and construction technologies.
These will all bring tremendous opportunities for equity market investors.
Pharma
In a recently issued government working paper, it was clearly stated that boosting domestic demand will be a key priority going forward.
Within this campaign, enhanced consumption of higher-quality pharmaceuticals will be a key component.
It helps enrich hundreds if not thousands of successful drugmakers and pharmaceutical product developers, thus boosting the local economy via non-export led growth.
Furthermore, it will help level the “health gap” between the financially well-to-do and the flood of working class newcomers entering China’s cities every day, thus helping do its part to bring standards of living more in sync across the income classes.
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China’s health care and pharmaceutical industries account for just 5.01% of total GDP, a level far below the Western world.
The Chinese government is expected to invest heavily in these areas, thus offering tremendous potential to holders of listed pharma plays.
Construction
Naturally, the hundreds of millions of Chinese who have left farms for urban flats over the years need a place to hang their hat, and residential developments aren’t inclined to build themselves.
Furthermore, the push for greater public health facilities will drive the need for bigger and better hospitals.
And more mass transit/subway lines will be needed to bring more urbanites to and from work and school each day.
Therefore, developers and infrastructure plays will likely get a big boost going forward.
Brokerages
Last but not least are securities brokerages.
Although not an obvious beneficiary of urbanization, with all the upside to sector theme shares expected to occur going forward, the first industry to benefit from higher turnover in a rising market are the traders and consultants.
Furthermore, the new government has made clear that it will thoroughly carry out financial sector firms.
That could potentially means consolidation and more investment capital in the hands of fewer brokerages.
Foreseeing which houses will rise to the top will bring very generous market returns.
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