Tue, Nov 14, 2017 - Page 11 News List

JPMorgan sees PRC deals heating up after congress

TOURISM SECTOR:Activity should heat up for hotels, travel agencies and online booking systems as China’s middle class expands, JPMorgan Chase’s Carl Chien said

Bloomberg

China is poised for an acceleration of deals as confidence grows in the wake of last month’s Chinese Communist Party (CCP) gathering and as the nation opens up to reforms.

Deal-making activity is set to pick up now that the CCP’s 19th National Congress is over, ending a wait-and-see period leading up to the event, JPMorgan Chase & Co Asia Pacific vice chairman Carl Chien (錢國維) said.

Look for increased activity in the tourism and airline sectors, he said.

“A lot of the question marks and uncertainties are behind us,” Chien said in an interview on the sidelines of the APEC summit in Da Nang, Vietnam, last week. “We’ll be able to see activities happening which weren’t happening in the first half of the year.”

His outlook follows Chinese President Xi Jinping’s (習近平) promise last week that the nation would take “big strides in reform,” and that foreign companies would experience a more transparent and orderly business environment.

In a major step on Friday last week, China said it would remove foreign ownership limits on banks, giving global financial companies unprecedented access to the world’s second-largest economy.

However, there is still progress to be made to improve the deals environment.

US President Donald Trump’s visit to Beijing yielded few concrete concessions on addressing a yawning trade deficit. While the White House unveiled a slew of deals with a US$250 billion price tag, many were non-binding memoranda of understanding that might never materialize.

However, the latest reforms further bolster the credentials of Xi less than a month after he cemented his status as the nation’s most powerful leader in decades.

The congress projected an image of strong leadership, Chien said.

“The 19th congress gave us a lot of stability,” he said. “It’s a good thing for the market.”

Chinese companies have announced a total of US$149 billion in deals involving foreign targets so far this year, a 39 percent decline from US$246 billion last year. One of the largest is a US$12 billion buyout of Singapore warehouse operator Global Logistic Properties Ltd by a consortium that includes Bank of China Group Investment (中銀集團投資) and a unit of China Vanke Co (萬科).

Chien believes industries related to China’s push for infrastructure investment, dubbed the Belt and Road initiative, are going to be key drivers for deals.

Activity should also heat up for hotels, travel agencies and online booking systems as the nation’s middle class expands.

Chinese firms sealed several notable tourism-related deals last year, including Ctrip.com International Ltd’s (攜程網) £1.4 billion (US$1.8 billion) acquisition of Skyscanner Holdings Ltd and China Life Insurance Co’s (中國人壽保險) US$2 billion purchase of a stake in Starwood Capital Group’s US hotels portfolio.

“As China gets wealthier, people demand quality of life. They want to see the world,” Chien said. “The vast majority of the people who do not speak the language — you need to have a full chain to service the needs of these people.”

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