ASEAN is the priority direction of China's peripheral diplomacy and a key region for jointly building the "Belt and Road" initiative. Since establishing a comprehensive strategic partnership in 2021, the China-ASEAN relationship has maintained a good development momentum. Since the full implementation of the Regional Comprehensive Economic Partnership (RCEP) in June 2023, China and ASEAN have been comprehensively and high-quality implementing the RCEP, accelerating the negotiation of the China-ASEAN Free Trade Area 3.0 version.

In addition to the trade in goods, the two sides' service trade and mutual investment have flourished, regional connectivity has become increasingly close, and the integration of industrial chain and supply chain has deepened. ASEAN and the ASEAN Plus Three (10+3) are also discussing the publication of a joint statement to strengthen regional supply chain connectivity, leveraging the complementary advantages of the 10+3 countries to enhance supply chain coordination and cooperation, further promoting the level of East Asian economic integration.

In recent years, with the continuous deepening implementation of the Belt and Road Initiative and the formal entry into force of the Regional Comprehensive Economic Partnership (RCEP), economic and trade exchanges between China and ASEAN have become increasingly frequent and close. Bilateral trade has grown from $8.36 billion in 1991 to $911.7 billion in 2023, expanding by over 100 times. China has been ASEAN's largest trading partner for 15 consecutive years and ASEAN has been China's largest trading partner for 4 consecutive years.

From January to July this year, the bilateral trade volume between China and ASEAN reached $552 billion, a year-on-year increase of 7.7%. During the same period, China's direct investment in all sectors in ASEAN was $12.96 billion, while ASEAN's direct investment in China was $7.3 billion, showing increases of 15.3% and 14.1% respectively. In addition, according to the General Administration of Customs of China, in the first 8 months of this year, China's imports and exports to and from ASEAN totaled 4.5 trillion yuan, a year-on-year increase of 10%, accounting for 15.7% of China's total foreign trade value during the same period.

Soochow Securities released a research report stating that railway construction investment is steadily increasing, and all links in the industry chain are expected to benefit simultaneously.

A previous research report by Donghai Securities pointed out that the Joint Statement between China and Vietnam clearly states cooperation in railway construction, with China supporting Vietnam in projects like standard-gauge railway. China's overseas infrastructure development has made new progress, which helps enhance connectivity between China and Southeast Asian countries, promotes the development of railway and other infrastructure industries in ASEAN countries, and is beneficial for China's exports to Southeast Asia and fostering new momentum in foreign trade. Previously, the Cambodia Thbong K'mol Canal Project, the Yangon-Hanoi High-Speed Railway, and the China-Laos Railway, which China participated in constructing, have all been successfully launched. In the future, China's international influence in infrastructure development is estimated to increase further, potentially leading to more overseas projects and benefiting industries related to project construction, construction machinery, and transportation equipment.

Related concept stocks:

CRRC Corporation (00390): From December 2023 to March 2024, the company signed a high-speed train unit senior repair order worth 14.78 billion yuan, accounting for 6.6% of the 2022 revenue, with a significant order amount. Level five repair will involve extensive replacement of train components, leading to a rapid growth in the company's high-speed train unit maintenance business.

China Railway Signal & Communication Corporation (03969): The company is the only domestic enterprise integrating the design, equipment, and construction of urban rail transit signaling and communication systems. In 2023, the company's market share exceeds 60% in high-speed rail weak electric integration business and over 37% in urban rail signal system integration, maintaining the top spot. The anticipated subsequent updates and renovations are expected to bring new flexibility to the company's business.

Times Electric (03898): Times Electric's preliminary performance in the second quarter exceeded market expectations, with a year-on-year net profit increase of 31% to 0.939 billion yuan, surpassing the bank's estimation by 15%. Goldman Sachs believes that the profit growth is mainly due to increased train deliveries and stable growth in new businesses. Amid an industry uptrend, the railway equipment business is expected to grow steadily this year, with the second half focusing on new train and maintenance contract bidding, as well as the progress in increasing the capacity of train IGBT chip modules.

China Railway (00390): China Railway is a leading player in transportation infrastructure, a giant conglomerate integrating survey design, construction installation, industrial manufacturing, real estate development, resource mining, financial investment, and other operations.

China State Con (03311): The company's main businesses include construction, project supervision services, thermoelectric business, infrastructure project investments, operation of toll roads, and exterior wall engineering business. GTJA's review points out that the Hong Kong construction market is expected to reach 300 billion Hong Kong dollars by 2025, with the overall gross margin of the company gradually increasing. This will lead the architecture engineering sector into a new cycle of technological innovation, significantly boosting valuation.