China’s OBOR program presents opportunity: RARE
A recent pick-up in activity for the Chinese government’s One Belt, One Road initiative could present some long-term opportunities for investors, according to global listed infrastructure manager RARE Infrastructure.
Development in OBOR was relatively slow in 2015-16 due to China’s capital control and currency concerns, RARE said. However, the pace has picked up recently with the financial support of the Asian Infrastructure Investment Bank and other banks.
“This is an important foreign trade policy and economic strategy that seeks to redevelop the historic Silk Road trade route that runs from China through to Europe. Projects relevant to OBOR include railways, roads, ports and energy infrastructure, said RARA Infrastructure portfolio manager Charles Hamieh.
Hamieh said listed infrastructure company China Merchants Port Holdings (CMP), a current holding in all three of RARE’s actively managed strategies, is strategically positioned to benefit from China’s push for the OBOR initiative and Free Trade Zones policy.
“CMP is China’s largest port operator across China’s five major port regions and has exposure to eight of China’s ten largest ports including Shanghai and Shenzen, which are amongst the global top three,” he said.
Hamieh said while OBOR would have a limited impact on global listed infrastructure in the medium term, RARE believed there were several long-term investment opportunities within the broader emerging market space.
“Infrastructure assets are set to be one of the greatest beneficiaries of all the long-term trends driving emerging markets as it gives direct access to emerging markets domestic demand and drivers, while creating underlying revenues that are more defensive due to their contracted/regulated nature, with explicit inflation linkage,” he said.
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