China Ports Rally on Free-Trade Zone: Shanghai Mover

Several Chinese port operators including Tianjin Port Co. rallied by the daily limit on speculation the government will allow more cities to join Shanghai in starting free-trade zones to boost their economies.

Tianjin Port jumped 10 percent to close at 7.59 yuan in Shanghai trading, the highest level since August 2011. The stock rose 39 percent this week. Wuhu Port Storage & Transportation Co., based in Anhui province, and Ningbo Port Co. also gained 10 percent today. The Shanghai Composite Index added 0.1 percent.

Shanghai’s Free-Trade Zone, which was approved by the State Council July 3 and may open as early as the end of next month according to the Shanghai Securities News, is part of Premier Li Keqiang’s drive to shift the economy toward services and sustain long-term growth.

Tianjin, a port city southeast of Beijing, submitted a plan to the commerce ministry last month, according to a July 10 report in the 21st Century Business Herald. The southern province of Guangdong is looking at setting up a zone in its Nansha new area, the Shanghai Securities News reported July 25, citing a statement from the local government. The Hengqin district in Zhuhai city has submitted plans to the provincial government to create a zone, the China Business News reported today.

“Tianjin submitted an application to the State Council to set up a free-trade zone similar to the one in Shanghai,” said Gerry Alfonso, a trader at Shenyin & Wanguo Securities Co. “It is likely that the authorities will approve that request. Investors are trying to build positions before there is an announcement.”

Tax Breaks

The zones would likely offer tax incentives to entice more companies to set up offices and warehouses, said Alfonso. This will increase the volume of goods transported, he said.

China is boosting efforts to attract foreign companies after investment from abroad fell last year for the first time since the global financial crisis. Authorities may alter some laws and administrative approvals on foreign investment in the proposed new free trade zones, according to the statement from the State Council.

Investors are speculating the government will allow more cities to start free-trade zones because it fits with China’s new growth model, according to Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co.

Provincial Slowdown

Chinese policy makers are trying to bolster domestic consumption and make the services industry a bigger contributor to economic growth. Shanghai’s free-trade zone will lure foreign companies and boost the number of overseas travelers, Citic Securities Co. wrote in a report dated Aug. 23. The brokerage recommended buying shares of retail and tourism companies.

Most provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals. Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg News.

“The concept of a free trade zone is a big breakthrough in government policy for China, and a free trade zone will raise the overall international cargo volumes from China,” said Amos Zhang, Shanghai-based analyst at Shenyin & Wanguo. “Investors are betting on the benefits a free trade zone will bring for these companies when the cities get approvals.”

— With assistance by Liza Lin, and Weiyi Lim

(Corrects date when Shanghai free-trade zone was approved in third paragraph.)
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