Main reference: Story in Sinafinance
FIVE CHINESE SHARES in particular are set to get a big boost from the ongoing migration of peasants from farms to flats.
This could could help kickstart the moribund stock markets.
All five happen to be from a sector that is likely to see much “building” action in the coming years, both literally and in terms of share values, and are certain to “cement up” their prices.
Henan Tongli Cement (SZA: 000885), Huaxin Cement (SHA: 600801), Shaanxi Qinling Cement (SHA: 600217), Tangshan Jidong Cement (SZA: 000401) and Anhui Conch Cement (SHA: 600585; HK: 914) are five of the most favorably-positioned A-shares expected to ride China’s historic urbanization tide -- an ongoing campaign which saw the world’s most populous nation become a majority-urban country just two years ago.
Anhui Conch, China's top cement play, is expected to be a major beneficiary of the country's historic urbanization campaign.
Photo: CompanyAnd putting an official seal of approval on a demographic revolution already three decades in the making, the months-old national administration in Beijing recently issued its draft urbanization plan.
At the same time, the State Council – the country’s Cabinet – also saw its Standing Committee brainstorm ways in which Mainland China might hasten the transformation of less-developed outskirts and shantytowns ringing fast-growing cities into more livable, productive residential districts.
Nearly every word within the recent official documentation coming out of the capital regarding urbanization policy revolves around the theme of large-scale capital construction, which can only be a tremendous boon to one building material in particular – cement.
State Council Premier Li Keqiang last week led the body’s meeting at which the Cabinet stated it would not only speed up infrastructural improvements in less-well-to-do areas of China’s sprawling urban metropolises, but also improve the quantity and quality of both policy and financing for the country’s city-building campaign.
The main goal of the government’s rejuvenated attention to urbanization was directly in line with one of the most oft-repeated catchphrases of the new administration – Building the Chinese Dream.
Anhui Conch's A-shares have struggled of late. Source: Yahoo Finance
Improving the welfare of the less fortunate and helping to stem the yawning wealth gap are seen as instrumental components of the Dream, and Beijing’s increasingly active hand in the urbanization revolution is considered part and parcel of the entire drive.
In addition, the country’s chief economic planner – the National Development and Reform Commission (NDRC) – late last month pronounced that both population growth limits and depopulation controls on cities, towns and villages across the country would be further relaxed.
This is a critically important sign that the national leadership is willing to remove another finger from the scale and allow a freer flow of human migration to wherever the market dictates.
And all indications point to continued net outflows of farmers and villagers from the countryside to the cities for the foreseeable future.
Analysts say this is the first time that so many government bodies are in such clear unison on how to proceed with urbanization in the world’s most populous country and its No.2 economy.
They expect the shantytown upgrades alone to attract over 300 billion yuan in capital investment, and a great deal of this will be spent on building materials like cement.
Of the five cement manufacturers expected to be the main beneficiaries of the urban building boom, China’s largest cement play – Anhui Conch – is likely to see some of the biggest upside from the ongoing historic demographic shift.
Less-than-concrete visibility
Goldman Sachs recently said that the major cement firms in China will be at the forefront of the building campaign thanks to their market position and experience, as well as their ability to operate in a fast-moving sector with less-than-concrete long-term visibility.
Recent performance of the benchmark Shanghai Composite Index. Source: Yahoo Finance
It said that profitability for China’s myriad cement plays will vary sharply from company to company, and that size does matter when seeking an even bigger market share in such a high growth potential industry.
Anhui Conch listed in Hong Kong in 2007 and began selling A-shares in Shanghai in 2002.
The research house said it is showing strong profit trends for the second quarter and reiterated its “Buy” call on the Central China-based building materials giant.
And with Chinese shares struggling to crawl out of near eight-month lows, a boom for cement stocks could help "build" the beginnings of a long-awaited bull run.
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