Asia Monitor April 2019

Notable Developments: China and Italy

Italy became the first G7 country to sign up to China’s Belt and Road initiative in March 2019, signalling a move away from the stance demonstrated by its European counterparts. As Italy is struggling with dire economic conditions, it hopes that its alliance with China can ultimately benefit the economy by increasing exports and creating more inbound investments from China. During President Xi’s recent state visit to Italy, thirty agreements were signed between the nations, one of which handed the management of the port city of Trieste to China Communications Construction, a Chinese engineering and construction company. Obtaining access to the port city is significant for China as it acts as a gateway to countries including Austria, Hungary, the Czech Republic, Slovakia and Serbia – all of which are future markets for China’s Belt and Road programme.


In March 2019, Thailand held its first general election since the military coup of 2014. The election was considered a contest between the military and pro-democracy parties. No political party has so far gained the 250 seats needed to form a majority government in the House of Representatives and discussions to form a coalition government are now underway. It is expected that the pro-democracy parties will join together regardless of policy differences in order to stop the military’s return to power. Independent election observers have claimed that vote counting in the election lacked transparency, leading to considerable sentiments of distrust and uncertainty amid the population.

Focus Industry: The Hotel & Lodging Industry

In 2018, the number of tourist arrivals within Asia grew by 6.0% from the previous year due to the growth of the region’s middle class, consequently driving an increase in demand for hotel accommodation. Low-cost air travel and the improvement of airport infrastructure have both contributed to the rising popularity of international travel, which directly increases demand for hotels due to longer-term stays. Hoteliers have responded to the increased travel in Asia by ordering the construction of 370,000 new rooms in the region with an additional 350,000 in the planning stages as at October 2018. For example, the first St. Regis Hotel in Hong Kong, a member hotel of the Marriott Group, opened on 12 April 2019 and Raffles Hotel, Singapore is to re-open in 2019 following c.18 months of top-to-bottom refurbishment. Whilst the majority of Asian cities have welcomed the investments made by the hotel industry, this is likely to lead to an oversupply of hotel rooms, putting pressure on existing hotels to maintain occupancy rates at competitive prices.

Tourists are now offered more choices when it comes to overnight accommodation due to the entrance of new players into the market offering innovative alternatives. Terahaku is an online platform which enables those travelling in Japan to book stays in temples across the country resulting in an authentic cultural experience. Xiaozhu, China’s answer to Airbnb, has over 500,000 homestay listings in 650 cities across the world, although this represents a small number of listings when compared to Airbnb, which has more than 4 million globally. Xiaozhu recently partnered with Alibaba to use the tech giant’s facial recognition technology to unlock the doors to a property listed on its platform with the aim of reducing the need for homeowners to interact with guests.

Investment Manager Commentary

Italy’s support of the Belt and Road initiative has put the country on a collision course with its European counterparts who have expressed strong doubts about China’s increasing global ‘takeover’. Whilst the Chinese government may invest significantly in Italy, the investment will likely come with conditions. The potential economic benefit to Italy may not be as great as previously thought.

The recent general election in Thailand has resulted in no clear victor so far, but a final outcome is expected to be announced in May. In the meantime, the pro-military party has been drafting the new constitution which will result in the military maintaining a key role in government whilst the legislature is split into factions. We may expect to see protests from Thai voters who are increasingly dissatisfied with the political unrest brought on by the military.

Contact Details: Harmony Capital Investors Limited, Room 811-817, 8/F, Bank of America Tower 12 Harcourt Road, Central, Hong Kong

Email: hcil-marketingteam@harmonycapitalinvestors.com


Created with images by sasint - "grand palace bangkok temple" • chuttersnap - "untitled image" • Mathew Schwartz - "untitled image" • Will Truettner - "untitled image" • Mariamichelle - "sensō-ji temple kyoto"

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