Stocks shaken amid rail safety fears

PUBLISHED : Tuesday, 26 July, 2011, 12:00am
UPDATED : Tuesday, 26 July, 2011, 12:00am


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The train crash that killed at least 39 people on the mainland rattled the stock market yesterday as the ambitious roll-out of the world's biggest high-speed rail network looked increasingly shaky.

The Shanghai Composite Index fell nearly 3 per cent, the most in six months, before closing at 2,688.746 points.

CSR Corp and China CNR Corp, the nation's biggest train makers, tumbled 8.9 per cent and 9.7 per cent respectively, as the deadly collision near Wenzhou raised concerns about the safety of the mainland's fast-growing rail network. The government has ordered a two-month safety inspection of the network.

Real estate developers slid as Credit Suisse said the accident may dampen demand for property in cities along new railway lines.

China Vanke, the country's largest developer by market value, declined 3.3 per cent to 8.14 yuan (HK$9.80), while Poly Real Estate Group slipped 4.6 per cent to 10.23 yuan. PetroChina, the nation's largest oil producer, lost 2.1 per cent to 10.36 yuan, its lowest close since September 30.

Jiangxi Copper, the biggest copper producer, slid 2.5 per cent to 34.85 yuan.

Three senior railway officials were sacked a day after Saturday's crash, which is the country's worse rail accident since 2008. It was also another blow to the ministry after minister Liu Zhijiu was sacked in February amid a corruption investigation.

George Yin, an analyst at Bocom International, said the disaster would have a short-term impact on passengers. But he said that in the long run, if the technical issues were solved, trains would still be the most competitive form of transport.

'I don't think the accident will have any significant influence on China's railway blueprint,' Yin said.

Under the five-year plan to 2015, Beijing will invest between 3.6 trillion and 4 trillion yuan in its rail sector.

Yin said some equipment companies such as Hong Kong-listed Zhuzhou CSR Times Electric would be affected, as the accident clearly showed that the signalling and power systems had problems.

'Before the reasons for the accident are specified we suggest investors avoid related companies in the rail industry, especially manufacturers of power and signal systems,' he said. Saturday's accident involved the first-generation bullet trains, which were launched in 2007 and have a top speed of 250 km/h - slower than the new Beijing-Shanghai trains.

Yin said the crash could curb exports of mainland-built trains for up to a year, but he doubted the effect would last too long, because 'compared with Japanese and French products, Chinese trains have an attractive performance-price ratio'.

But he said future sales depended on China improving the safety of its high-speed train technology.

Air China and China Southern Airlines also fell slightly on the mainland market. China Eastern Airlines gained 1.2 per cent in Shanghai.

In Hong Kong, CSR, which built both of the crashed trains in a joint venture with Canada's Bombardier, fell as much as 16 per cent to its 12-month low of HK$5.85 yesterday, but rallied to close at HK$5.98.

Shares in Zhuzhou CSR Times Electric slumped 14 per cent.

But mainland airlines' H-shares and highway operator stocks surged yesterday after investors dumped railway stocks.

Air China rose 3.59 per cent to close at HK$8.08, while China Eastern Airlines soared 4.76 per cent to HK$3.96 and China Southern Airlines added 3.4 per cent to HK$5.17.