Main reference: Story in Shanghai Securities News
CHINA'S TENSIONS with its neighbors are heating up again.
In fact, some military affairs experts are pointing to 2014 as being more of the same, with tense ties to continue between the PRC and especially Tokyo, Hanoi, New Delhi, Manila and even Seoul.
Add to these the fact that China’s not yet year-old central government is intent on modernizing and strengthening the country’s defense establishment which of course translates into the need for more planes, ships, tanks, etc...
On the whole, 2014 will likely see strong demand for naval, land and air-based weaponry – both offensive and defensive – as well as the vast swathe of communication and navigation equipment needed to coordinate all branches of the military.
The recently-convened plenary session also resolved to elevate military modernization and preparedness to historically-high levels.
All of these signals – implied or overt – mean tremendous opportunities for listed firms with military-related contracts.
According to the Stockholm International Peace Research Institute (SIPRI), China spent 166 billion usd this year on defense, giving it the world’s second largest military.
China’s military expenditure rose year-on-year, but stayed stable at around 2.0% of its GDP.
Therefore, because tanks and planes don’t grow on trees, here are some of the A-share firms that are likely to get a boost from Beijing’s bickering with its neighbors in the coming year.
Its systems are increasingly in favor with China’s military contractors who appreciate the domestic-market focus of the IT firm.
China Shipbuilding Industry Co Ltd (SHA: 601989) focuses on the manufacture, repair and adaption of ships.
The PRC’s growing assertiveness in the Pacific means firms like China Shipbuilding will be called on to retrofit and repair a growing flotilla of naval assets, such as China’s first carrier, which was recently launched and was adapted from a Ukrainian vessel.
In September, state-backed China Shipbuilding Industry announced a goal of raising as much as 1.4 billion usd via private share sale to purchase assets used for manufacturing warships, the first time China is tapping capital markets to bankroll its military expansion.Greatwall Information Industry Co Ltd (SZA: 000748) is a manufacturer of computer terminals and electronic products.
Jiangxi Hongdu Aviation Industry Co Ltd (SHA: 600316) helps provide the eyes and muscle in the air that China’s leadership feels it needs to keep watch over the country’s long coastline and offshore assets.
China AVIC Avionics Equipment Co Ltd (SHA: 600372) competes on certain levels with Hongdu for military contracts.
Finally, Sichuan Haite High-Tech Co Ltd (SZA: 002023) focuses on the maintenance and testing of aeronautic equipment.
These five A-share firms are focused on air and sea equipment and navigation sectors, all of which Beijing’s leadership has been working hard to upgrade, and which is expected to continue on course in 2014.