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Xiongan New Area

Beijing’s top cement firm suggests caution as stocks soar thanks to Xi’s plans for China’s new futuristic ‘dream town’

Surprise announcement of blueprint for Xiongan New Area in Hebei sparks rush for related shares

PUBLISHED : Thursday, 06 April, 2017, 6:02pm
UPDATED : Monday, 17 April, 2017, 12:46pm

Beijing’s top cement maker has warned investors to remain “rational” after its shares skyrocketed a whopping 49 per cent in two days after the Chinese government announced over the weekend to build a special economic zone 100 km from the national capital.

“Of course, we are confident we will benefit from the development of the Xiongan New Area in Hebei province, long term, given we contribute about 60 per cent of cement output in the region,” BBMG Corporation’s chairman Jiang Deyi told a press briefing in Hong Kong on Thursday, where it is listed.

“But we also want to remind investors of risk, and that the new economic zone’s positive impact on our business operation will not kick in immediately.”

The company’s shares dipped more than 7 per cent on Thursday, after Morgan Stanley slashed its target price by 33 per cent, citing concerns over its high valuation and subdued earnings in property business. But it was also given a series of target price upgrades by other investment banks.

Credit Suisse, for example, predicted BBMG’s cement sales to deliver a 106 per cent annual rise this year on back of President Xi Jinping and the State Council’s decision to pick the hinterland as a new economic zone.

The cement maker logged a 33 per cent net profit jump last year to 2.7 billion yuan, aided by a business overhaul.

Investors have also scrambled to snap up shares in companies which they see as potential winners of the new economic district, being planned in the Hebei backwater of Xiong county.

It is already being referred to as China’s next “dream town” by some, and a future rival to Shenzhen and Shanghai’s Pudong New Area, which house many multinationals’ China headquarters.

Also the biggest cement supplier in Tianjin and Hebei as a whole, BBMG has been a top performer on the Hong Kong bourse since the beginning of the week.

As well as its Hong Kong shares soaring, the little-known manufacturer has seen its mainland traded stock surge to the 10 per cent daily limit for two consecutive sessions.

What happens to a Chinese backwater when it becomes the centre of Xi Jinping’s futuristic dream city?

Jiang added he “felt pleased and surprised to see” his company become an instant darling among investors.

“A window is opening to us… we are working on some proposals regarding how we are going to best cash in on opportunities related to Xiongan New Area.”

As well as BBMG, more than 40 stocks based in the zone or nearby regions soared by their daily 10 per cent limit on the mainland on Wednesday, the first trading day since the mainland’s main Ching Ming Festival public holiday.

Leading gainers were property developers, energy firms and port operators, as well as other cement producers.