In part 2 of this 4-part series, we continue discussing other investment themes in the Greater Bay Area that can deliver returns to investors in the long run without running out of steam.
Investment Theme 2: Tech Is The Key
Part of the reason for the Greater Bay Area project is to ride on tech, media and telecom (TMT) sector where the Greater Bay Area holds a competitive edge. Today, Shenzhen is home to high-profile hardware/software companies and has an established talent pool, IT research and supply-chain capabilities.
The Greater Bay Area project will encourage exchange between Shenzhen, Guangzhou and Hong Kong and help Guangzhou and Hong Kong to catch up in terms of R&D capabilities and synergies between internet companies will also drive growth in the software segment.
The roll-out of 5G could also drive internet connectivity from smartphones to other consumer products, i.e. Internet of Things. Another area that will likely achieve high growth from the Greater Bay Area project is online advertising where internet firms will further capitalize on their user data analytics capabilities.
Recommendations: Tencent Holdings, AAC Technologies
Investment Theme 3: Explosion Of Data Centre Demand
Data centres will be the backbone of new technology and economic development in the Greater Bay Area. The establishment of new tech companies and improved network connectivity will drive higher demand for data centres. Based on DBS’ study, the demand for data centres will be mainly driven by cloud and internet applications.
In the long term, demand for data centre services will also be driven by the Internet of Things (IoT), Artificial Intelligence (AI) and Virtual Reality (VR) applications. Old industrial buildings could be converted into data centres to meet rising demand and supply shortage. DBS forecast the number of data centres in the Greater Bay Area to grow at 7.7 percent per annum in the next 3 years.
Recommendations: GDS Holdings
Investment Theme 4: Warehouse Expansion For Manufacturing Relocation
Warehousing will be among the long term growth drivers for the Greater Bay Area. Since China will be migrating its manufacturing industry away from the Greater Bay Area, this will drive demand for transportation and warehousing in the outer areas of the Greater Bay Area. DBS forecasts per capita logistics space in the Greater Bay Area to grow to four times of the current level in Shanghai.
This investment theme will drive multiple industries including the logistics, property and automobile industry. Property players like Vanke, Blogis, Guangzhou R&F and SF Express will be the early beneficiaries of infrastructure investments in warehouse in the Greater Bay Area. Logistics companies such as Kerry could also leverage on its extensive global network and IT management systems to ride on the Greater Bay Area development.
Recommendations: Vanke, Blogis, Guangzhou R&F, SF Express, Kerry Logistics