Hong Kong-listed rail firms surge on investment news
Big three boosted by indications that the sector will receive a large lift in spending
The Hong Kong share prices of mainland railway firms rose yesterday on several news items that indicated accelerated spending on the rail systems.
The government's main motive for increasing railways spending was to stabilise the faltering economic growth at near 7 per cent, Guotai Junan Securities analyst Gary Wong said.
China Railway Group rose 5.2 per cent to HK$3.63 yesterday, while China Railway Construction jumped 7.1 per cent to HK$7.36 and CSR rose 4.2 per cent to HK$5.52.
Wong said the increases were due to the country's strong spending on railways last month, Premier Wen Jiabao's call for accelerated investment in transport infrastructure in mainland cities, and increased targets for network spending for this year.
The mainland's fixed-asset investment in railways soared 93 per cent year on year to 72.66 billion yuan (HK$89 billion) last month, the highest level this year, the Ministry of Railways said. The surge cushioned the fall of investment in railways for the first nine months, which was 13 per cent down from the same period last year, in contrast to the 70 per cent year-on-year plunge in January.
For this year, the ministry again revised upwards its target for fixed-asset investment to 630 billion yuan and railway construction spending to 516 billion yuan in a railways construction bond prospectus published on Wednesday.
In its fifth bond prospectus, published last month, it had raised its target for fixed-asset investment to 610 billion yuan and railway construction spending to 496 billion yuan.
"Both confirm our view that the Ministry of Railways is taking action to accelerate railway investment rather than making empty promises," a Barclays Capital report said. "These would further improve market confidence in railway-related companies' earnings in 2012 to 2013."
At a State Council meeting on Wednesday, Wen called for the building of transport infrastructure to be accelerated and the financing channels for it to be increased.
"Currently, public transport in our nation's cities lags far behind the needs of socio-economic development and people movement, with low usage of public transport in most cities. To relieve congestion and pollution, municipal public transport must be given top priority," a report on the government website said.