Riding the Silk Rooster

Catching Themes
China Merchants has a knack for catching themes. China Merchants Holdings has been a decently managed company in the China context, holding decent port assets. But investors, mainland and foreign, always seem to get taken away by some idea of golden returns. In the late ’00s there was all this fanfare about its Vietnam investment with billions of HK$ market cap added pretty much on the back of the concept.
Having Shanghai Port Group shares take off in the late ’00s also helped propel the shares into the stratosphere for awhile, as owning a stake in a Shanghai listed company offered investors participation in China rallies.
Yet, we know what happened to plans for Vietnam development. It was a total dud due to massive overbuilding of port assets. China Merchants let the project die quietly after a few permutations. The Sri Lanka port expansion also was not without its controversies.
Ultimately Shanghai Port after 2008 turned out to be a little less exciting for 5 years or more – Until September 2014. Since then its shares have doubled. This is one reason why shares of HK China Merchants Holdings perked up recently. But there is also the fanfare of China going big in global infrastructure as a result of a ‘new’ Economic Silk Road initiative, which was laid out in NDRC in late March 2015 in a paper entitled Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road.
COSCO Pacific has not had it so easy since the late ’00s. It hasn’t been able to recover from the perception of being a passive patsy for the poorly run COSCO parent and having a few more passive port investments as well as a boring container leasing business (which it sold parts thereof more than once). But, in its defense, it has always maintained 1) good disclosure, and 2) a good dividend distribution.

This post was published at Acting-Man on April 8, 2015.