"One belt one road is an under appreciated unstoppable trend that will underpin Asian markets"

27 August 2017

Dear Fellow Investor,

China spent over 2 trillion USD on infrastructure last year while the US spent less than 1 trillion. 

Trump wishes to match China spending on infrastructure but the opposition party and even some in his own party  refuse to cooperate. It boils down to political paralysis.

As investors we must follow the macro trends and China development is one of these trends.

China is now calling the shots in Industrial metals pricing; Trading volumes on China's three exchanges reach record levels; Demand buoyed by China’s New Silk Rail Road Route connecting 16 cities in China with 15 cities in Europe; Aussie / Japan Yen Traders tracking Shanghai base metals; -

China is dominating the global resources game. When Iron ore futures on the Dalian Commodity Exchange (DCE) surged to a record high earlier this year, on expectations about Beijing's spending plans for building up the country’s transportation network, spot prices in Australia and New York jumped soon after.

This pattern demonstrates China's growing clout in setting the prices of commodities. Prices of the steel-making material have since come off their 52-week highs, but price gyrations underscore just how far China has come in pricing power on both the spot and in the futures market, particularly for heavily-traded mineral ores like aluminum and copper, which is regarded as a barometer of global economic health. 

“Over the last two years, the drivers of global metal price discovery have, in our view, shifted to China."
Gary Dorsch  Global Money Trends

Rail freight trains rarely generate main stream media attention. Yet the January 18th, 2017; arrival at DB Cargo’s London Eurohub terminal in Barking, east London, was slightly different. A freight train had travelled more than 7,500-miles to Britain from Yiwu in eastern China, and was the first-ever freight service to complete the journey. 

Taking 18-days to pass through eight countries, the train received a VIP welcome, with Chinese lion dancers and TV crews from around the world gathering to mark its arrival. Such strong interest is due to the potential of transEurasian rail freight to British logistics and forwarding companies. 

The journey took around half the time of a similar sea voyage, and cost approximately half of the equivalent air freight journey. “This moment was important to show that we can run the train in less than 18 days to the UK,” said InterRail Group, Switzerland, the operator of the service. It’s hopeful of adding more British services in the future. 

The service, carrying garments, bags and suitcases among other items, passed through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium, France, and finally to London along China’s so-called “Belt-and-Road” initiative that was launched in 2013. The key trading route will greatly affect other companies that transport goods by sea and air. 

The first direct freight train to reach the United Kingdom from China, ended after a 16-day journey, which normally takes 45-days by sea. On January 2nd, London became the 15th city in Europe that was added to a train freight line.

How do we leverage on this trend ?  We can look at high quality  shipping and logistics  companies listed in Hong Kong/ Singapore and Malaysia  as well as    resource companies in Australia.
I am focusing on Asian stock markets for my clients as I believe they offer better value with less risk compared to developed markets  For example Hong Kong trades at a PE of 12.7 compared to  the S & P 500 PE  of 25

One belt one road is an under appreciated unstoppable trend that will underpin Asian markets.

Obviously we must be selective in how we allocate our capital  and in the following weeks I will be focusing on Asian market opportunities we can profit from based on this scenario.

Invest well and grow your wealth
Bill

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