Rail ministry's debts bring biggest freight fees rise in a decade
Biggest increase in tariffs for a decade lifts share prices of rail companies as railways ministry battles massive debt burden
The crushing debt burden of the Ministry of Railways has compelled Beijing to impose the biggest rise in rail freight tariffs in a decade.
Although that may be bad news for freighters, it came as welcome news on the stock market, where the Hong Kong share price of Guangshen Railway, a freight and passenger rail company operating in Guangdong province, rose 13.5 per cent from HK$3.27 last Friday to HK$3.71 yesterday.
The Shanghai share price of Daqin Railway, a coal rail operator, rose 8.8 per cent from 7.28 yuan last Friday to 7.92 yuan on Monday, before being suspended on Tuesday; and shares in China Railway Tielong Container Logistics, a rail container operator, ended at 7.75 yuan yesterday, 2.6 per cent lower than Monday but 15 per cent above its price on February 4.
The rate rise will increase Daqin's revenue by about 1.6 billion yuan (HK$1.97 billion) this year, the Shanghai-listed firm announced. Its turnover was 43.5 billion yuan in 2011.
With effect from yesterday, the railways ministry and the National Development and Reform Commission raised the rail freight tariff by 13 per cent, the largest increase since 2003, a report from Nomura said.
Macquarie analyst He Saiyi said the railways ministry's debt burden was rising and its gearing ratio was beyond control, requiring it to generate more income.