Which industry stocks benefit from public investment disbursement?

According to Agriseco analysis group, stocks in the construction materials and infrastructure construction industry will benefit directly from the wave of public investment disbursement, while industrial park real estate, residential real estate and logistics will benefit indirectly.

In a newly published analysis report, the analysis team of Agribank Securities Company (Agriseco) stated that public investment is considered a driving force for economic growth in the context that other driving forces for economic growth such as consumption and export are still recovering slowly in the context of global economic fluctuations.

The total public investment capital plan for 2024 is VND 657,000 billion, an increase of 12% compared to the implementation in 2023 and equal to 95% of the 2023 plan. In the first two months of this year, the value of public investment disbursement continued to improve, estimated at nearly VND 60,000 billion, an increase of 21% over the same period in 2023.

“We expect the public investment disbursement rate to continue to increase next year as many key projects (highways, inter-regional roads, coastal roads) have been and are having difficulties in investment preparation resolved,” Agriseco’s report wrote.

The promotion of public investment disbursement is expected to create spillover effects to many sectors. It is estimated that if public investment disbursement increases by 1% compared to the previous year, GDP will increase by 0.058%. According to Agriseco, construction materials and infrastructure construction are two sectors that directly benefit from increased public investment disbursement. Meanwhile, the three sectors that indirectly benefit are residential real estate, industrial park real estate and logistics.

Specifically, the construction materials group (steel, stone, cement, asphalt) benefits directly right after the site clearance stage, entering project implementation until the completion of project construction activities. For the steel industry, steel manufacturing and supplying enterprises for public investment projects and transport infrastructure will benefit from the increased demand for steel consumption. For the construction stone industry, many public investment projects (North-South Expressway Phase 2; Bien Hoa-Vung Tau Expressway, Long Thanh Airport) are currently experiencing a shortage of land for land leveling. Therefore, Agriseco expects that leading stone enterprises, owning large stone mines located near key projects, will benefit significantly.

Similarly, the infrastructure construction group also benefits directly from the implementation of key public investment projects. Some key transport infrastructure projects such as the North-South Expressway Phase 1 and 2, Long Thanh Airport, Ho Chi Minh City Ring Road 3, Ring Road 4 - Capital Region, and the 500kV power line project will be implemented, which will help construction contractors (especially contractors with experience in project construction). However, some factors that businesses in the infrastructure construction group need to pay attention to are cash flow balance and shortages and fluctuations in construction material prices.

For the residential real estate group , Agriseco experts believe that businesses in this industry will indirectly benefit from the approval of the planning of large public investment projects. This will attract demand for real estate and housing in areas and provinces adjacent to the projects when the infrastructure is expected to be completed. Potential localities in the coming period include: the North (Hai Phong, Hung Yen, Quang Ninh), the South (Southeast economic quadrangle: Ho Chi Minh City, Binh Duong, Dong Nai, Ba Ria - Vung Tau). Some policies to remove difficulties in the real estate market are expected to resolve some capital and legal issues for real estate businesses. However, Agriseco noted that the real estate industry is also facing many other risks such as corporate bonds, investor confidence, and transaction liquidity.

The industrial park real estate group expects to attract more FDI capital into industrial parks when the completion of traffic infrastructure and highways will help increase connectivity between regions and industrial parks.

“In 2024, industrial park real estate will continue to benefit from capital flows shifting production plants, signed FTAs, and new-generation FDI attraction policies. Enterprises with advantages in land funds available for lease, signed MOUs for lease, and stable financial capacity are expected to benefit,” Agriseco’s report said.

Logistics is the last group expected to indirectly benefit from the wave of public investment disbursement. According to Agriseco, the completed expressways will make logistics operations much more convenient, thereby acting as a catalyst to promote economic growth and attract foreign investment. Major projects such as Long Thanh Airport are also expected to help the freight and passenger transport groups benefit from increased operating capacity.

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