For decades the Asian Development Bank has been encouraging the private sector to invest in infrastructure, setting up initiatives to help governments attract investors.
Chief among them is the Asia Pacific Project Preparation Facility, a $73 million trust fund set up to bring private investors into so-called public-private partnerships. Ryuichi Kaga, head of public-private partnerships at ADB, says his office helps governments with project design, feasibility studies, and the bidding process, and even teaches them how to provide full documentation for the sake of transparency.
One of the bank’s new initiatives, Kaga says, is supporting institutional investors, including sovereign wealth funds, by “introducing our deal flows and advising them in the area of due diligence and project structuring.”Green-field investments can be risky. Citigroup’s Hong Kong–based Pierre Lau — Institutional Investor’s top-ranked Asia power sector analyst — recommends that global fund managers mitigate risks by buying shares in publicly listed infrastructure companies.
His top picks are downstream natural-gas distributors China Resources Gas Group and ENN Energy Holdings, both listed in Hong Kong. China Resources’ shares traded at HK$28.10 ($3.62) on March 17, up 29 percent for the year, while ENN traded at HK$44.5 a share, a 40 percent increase from the end of 2016.
The two companies have seen double-digit growth in sales over the past year, with earnings driven by China’s rising demand for natural gas. Lau estimates that industrywide natural-gas sales in China will see a 10 percent annual growth rate in 2020, compared with 6 percent growth in 2016.
Lau also likes clean-energy companies, including Beijing Enterprises Water Group, which traded at HK$5.91 a share on March 17, for a 14 percent year-to-date gain, and environmental technology group China Everbright International, whose share price of HK$10.98 that same day was up 25 percent for the year. “We are positive on the outlook for growth-oriented countries, and in particular we expect to have accelerated growth in China and India in 2017,” Lau says.
See related stories: Asian Development Bank: A Force of Stability; China’s Consumers Power Ahead; and Asia’s Ballooning Bond Market.
