At the recent G–20 summit in India, the declaration of a new economic and trade corridor caught everyone’s attention.
With an emphasis on logistics and smooth and safe transportation, the economic benefits for stakeholders will be manifold. The establishment of new rail corridors between Asia and Europe via Saudi Arabia will allow passengers and heavy goods movement. The passage also aims to build new pipelines to transfer renewable energy and data connectivity.
The end goal of the new corridor will allow these regions to secure their supply chains, increase trade capacity, and ensure a more trust-friendly and secure economic relationship.
For India and Europe, the UAE will continue to serve as the transit point. While the exact details regarding the actual country-wise contribution and set-up are not yet known, we look at a few sectors and stocks that could benefit from the proposed corridor.
Construction materials
Building a new rail and pipeline corridor will require the creation of large-scale infrastructure projects. These infra projects will require core resources like cement, steel, and other heavy goods. Construction of rail ports, cables and pipelines will require heavy investment in the construction industry.
Existing stocks that could benefit include International Holding Co., Fujairah Cement Industries, Orascom Construction and Emsteel Building Materials.
Logistics, air freight and defense
As per the initial projections, India would be connected via sea routes to the UAE. From UAE, the upcoming Etihad railway project will transport goods via Saudi Arabia, Jordan and Israel. From Israel, the ports will move the goods to mainland Europe via ships to Greece and Italy.
It means the UAE’s water ports and maritime infrastructure will see heightened activity and usage. In this regard, stocks to watch out for include Gulf Navigation, Abu Dhabi Ship Building, Abu Dhabi Ports, and National Marine Dredging.
While the overall emphasis would be on sea-borne activity, the economic corridor will also benefit aviation-related stocks, including Aramex and Air Arabia.
Other sectors
India and Europe are big consumer markets with sizeable populations. It implies a considerable scope for consumer utilities, F&B, and leisure and hospitality operators. Stocks to watch out for include the National Corp for Tourism and Hotels, Abu Dhabi National Hotels and Agthia Group.
