Stocks connected to the concept of the Greater Bay Area in southern China have raced ahead after the central Chinese government this week released its masterplan for the region.
It's being hyped as the creation of "the Chinese Silicon Valley." The plan is to foster transportation, logistics and economic development in southern Guangdong Province, just across the border from me here in Hong Kong.
The giant scheme spans Hong Kong, Macau and nine mainland cities. It's the most-developed part of China, home to 70 million souls. That's slightly more than Thailand, the United Kingdom, or France. Anyone with a vested interest is telling everyone else how great the Greater Bay is going to be.
I've got my doubts. But mainland speculators aren't hanging around pouring over the details. Their U.S. counterparts can watch to see if the counters maintain that momentum.
One thing's for sure: There is going to be a lot of cement poured. China is already resorting to nationwide stimulus to kick a slowing economy back into action, and infrastructure projects inevitably are the first place leaders look to start. Double that down in Guangdong.
China Resources Cement (CARCY) , up 22.1% in 2019, and Anhui Conch Cement (AHCHY) , up 19.6% so far this year, have the biggest capacities and market share in Guangdong and next-door Guangxi provinces, the brokerage Nomura notes.
The cement companies have shown a steadier progression than some port stocks, and their ADRs make them easily accessible to U.S investors.
On mainland exchanges, several stocks leaped the 10% daily limit after the plan was unveiled on Monday. That's put the exclamation point on a rally since the start of the year.
Many of these stocks have sparked to new life. The stock of Shenzhen Yan Tian Port Holdings (SZ:000088) has risen 28.2% in 2019, arresting a persistent slump that started in the summer of 2017.
Likewise, Guangzhou Port (SH:601228) shares are up 22.4% so far this year, their only signs of life since the company went public and began a persistent slide in the spring of 2017. The company runs the deep-water terminal in Nansha as well as its namesake Guangzhou, the former Canton.
Not to be left out, Zhuhai Port (SZ:000507) in the city just across the border from Macau has advanced 23% this month alone. That has also been on the slide since mid-2017. But like some of these stocks, it has started to show strong volatility, correcting 5% on Wednesday as the enthusiasm ebbs.
China Merchants Port Holdings (CMHHY) has a global network of port operations well beyond Guangdong Province, as well as within it, and is international enough to have an ADR. So it offers diversification should the Greater Bay plan not go as planned. It does have port operations in Hong Kong, Shenzhen and lesser Guangdong ports like Zhanjiang and Shantou, though, and is up 20% this year.
Property developer Guangzhou Pearl River Industrial Development (SH:600684) has a concentration in the Guangdong region, and is up 34.9% this month alone. That's despite an extremely tricky environment for property developers in China, where the authorities are intent on suppressing home-price gains.
If you ask me, the Greater Bay Area is nothing more than a nice marketing catchphrase. It's not even accurate -- the Pearl River Delta is, well, the delta surrounding the estuary of China's fourth-largest river, not a bay at all.
A mere detail. Everything in China has to be part of a "grand scheme." It's what the Communist Party uses to legitimize its authority. "You see? Everything is going according to plan!"
So the central government this week released a 62-page Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area. It's full of "guiding ideology," "basic principles" and "strategic positioning."
There will be a "special network driven by poles and supported by axes." There will be an "open community for coordinated innovation" in the region. There will be a boon to ecological conservation, innovations for the "modern industrial system," and the creation of a "quality living circle for living, working and travelling."
It sounds like it will still basically amount to a bunch of infrastructure, in the traditional vein of development for a nation long run by officials with backgrounds in engineering. Wait, what's this? It is also "a new attempt to break new ground in pursuing opening up on all fronts in a new era." Let's see how much they open up the Internet, or let in banned communications media like Twitter (TWTR) or Facebook (FB) .
There's an ulterior motive. Hong Kong and Macau are both "special administrative regions," with their own rules and regulations. I can get away with writing articles critical of the government, point out that some people here think Hong Kong would be better off independent of the motherland, mention the 1989 Tiananmen Square massacre if I want. Despite the plans of "opening up on all fronts," these are things I could never do even in a chat forum, let alone a news column, inside the "Great Firewall of China" across the border.
Hong Kong has a history of housing uppity radicals and dissidents. The Greater Bay Area plan, as well as a proposed new law allowing extradition from Macau and Hong Kong to China, are all ways of bringing the city, and the less-uppity but gangster-rich gambling hub of Macau, tighter to the mainland.
In the document, this is described as a "further step in taking forward the practice of 'one country, two systems.' " It will "deepen cooperation" between the mainland, Hong Kong and Macau. It will also "enable compatriots in Hong Kong and Macau to share with the people in the motherland both the historic responsibility of national rejuvenation and the pride of a strong and prosperous motherland."
Cooperate, or else!