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INVESTMENT: While equities fall, investing in OBOR network could produce long-term gains
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While equities fall, investing in OBOR network

could produce long-term gains

By Anthony Lawry


上个月我们提到,全球经济在中美两国关系缓和的趋势下健康发展,大家对中国的金融前景一致看好。5月份这一趋势则继续保持。上周早些时候,中美两国签署了秘密贸易协议,开放两国关系,美国牛肉将大批出口到中国,而中国则可以向美国出口家禽产品等等。总之我们可以看出,特朗普首脑会议似乎产生了一些实际的经济成果,这也是中国双赢和平崛起的良好势头。但是这并不能解决国内房地产市场过热等长期问题。自四月中旬以来,中国股票表现不佳,全球股市今年上涨约2%,而中国股市下跌近7%。


此时投资者可以将目光投向OBOR--"一带一路"。中国就"一带一路"项目与各国元首举行会议,不论是在理论上还是在行动上都投入巨大的努力。投资者可以期待从这个拥有万亿美元巨额投资的大项目中看到长期投资增长。虽然"一带一路"项目所投资的国家多在战争多发区边缘或有地缘政治与制裁等风险,但是谨慎选择依然可以有所收获。在这其中,建筑与能源公司将获得较大投资与发展。投资者应着眼研究受益较大的大型项目及其行业,帮助自己收获更好的投资回报。

BT 201706 INVESTMENT 05As penned in this space last month, the largest political risk of the most important economic relationship for the positive health of the global economy is continuing to subside while China's financial risks have taken a toll on its overall economic outlook over the past month. While this was the trend for last month, the month of May has only seen these trends accelerate as opposed to merely stagnating to staying level. Earlier last week, the US and China penned a mildly secretive trade deal which significantly liberalized relations between the two countries including opening markets to each country in specified sectors of their respective economies. China will now allow for US beef companies to export products to China while the US will allow China to export poultry products to the US. China gained greater access to the US banking industry to purchase local and national banks while the US gained greater access to China's agricultural sector to sell genetically modified seeds within the country. Other easing of restrictions allows for credit card companies and credit rating agencies to operate more freely in China.


BT 201706 INVESTMENT 03In sum, it is easy to see that the political risk of a trade war between the two countries is far from a real risk to the relationship as the Mar a Lago Xi/Trump summit appears to have produced some real economic results. This can only be seen as a good sign for China's win-win mutually beneficial peaceful rise. In spite of this, China's macroeconomic environment is clearly weighing down on growth that the country greatly needs. Trade data was particularly weak and overestimated for the last month while central authorities are eyeing longer term problems such an overheated property market and provincial debt. Investors are particularly feeling the brunt of these problems. Since mid-April, Chinese stocks have been the worst performers in all equity markets which have seen a total of more than $560 billion US dollars erased in total net worth from the route. It is a little difficult to see why this is the case, but for the most part it appears to be from increased competition from low-wage exporters on top of lesser than expected global growth. Despite this, global stocks have been up around 2 percent for the year while Chinese stocks are down nearly 7 percent. Bloomberg also recently reported that more pain is yet to come for Chinese investors. Overall, financial risk still looms.


hl INVESTMENTNonetheless, there are a few silver linings in the longer term that investors can look forward to seeing metastasize, albeit for several years down the road. China's One Belt One Road (OBOR) project just had its first meeting with various heads of state from around the world demonstrating the seriousness of member-states of the international financing bank to take the infrastructure investment plan to new heights. The OBOR project, comprising of various maritime and land routes, is designed to beef up energy, transportation, financial, and human infrastructure throughout the developing world from China to Europe. Capturing growth from this $1 trillion US dollar project would allow for investors to see a significant degree of long term growth the likes of which could potentially be large enough to induce several heads of state like Russia's Vladimir Putin and Turkish President Recep Tayyip Erdogan to Beijing for the Belt and Road Forum which saw representation from more than 100 countries inside and outside official architecture for the project. To be clear, the project is truly an ambitious attempt to alter the global economic order created after the end of the World War II.


But, how can one actually capitalize upon this? It is difficult to say, but investigating investment pledges made by China can explicate where Beijing is making is largest bets. Countries with particularly higher investments within the OBOR framework from the project's main investment institution the Asian Infrastructure Investment Bank include countries like Pakistan, Russia, Singapore, and India. It is easy to see which companies will benefit from this too primarily including construction and energy companies such as Chinese producer of cranes and piling machinery LiuGong. The company is listed on the Shenzhen exchange and has been up ten percent for the year.

BT 201706 INVESTMENT 04
Unfortunately, similar projects, such as the World Bank, have not been quite as successful as some have hoped. Since its inception, the World Bank has only seen less than 1 percent on $40 trillion in investments throughout the developing world. This is the crux of the problem that goes along with investing according to the potential of future OBOR returns; it happens to be quite a risky business. This not only includes the financial risks that go along with investing in developing countries, but unforeseen geopolitical or political risks such as sanctions or war as many of these countries are either in the midst of a warzone or right next to one. So while capturing investments for the winners of OBOR projects could be seen as incredibly profitable, it is also incredibly difficult to achieve. This is somewhat the problem of emerging market mutual funds or electronically traded funds which feature an emerging market's top companies, companies which could see their stock value slide while the country at hand is seeing phenomenal economic growth such as in Vietnam or the Philippines. In sum, particular winners for OBOR may be emerging and investors should take a careful look at the sectors most impacted by the massive project.


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