Shares of China CNR and CSR Corp jump on resumption of trading
Shortly after the market opened, shares in CSR were up 7 per cent, trading at a 52-week high of HK$7.65, while shares in CNR rose by 5.7 per cent to touch a record high of HK$7.20 since its listing in May.
Shares in train makers China CNR and CSR Corporation rose sharply yesterday before sinking back amid a surge in turnover after they resumed trading following denials by both firms that the central government had instructed them to merge.
Shortly after the market opened, shares in CSR were up 7 per cent, trading at a 52-week high of HK$7.65, while shares in CNR rose by 5.7 per cent to touch a record high of HK$7.20 since its listing in May.
Both shares retreated later in the day, with CSR closing at HK$7.10, around half a per cent lower than Wednesday's close, before the trading halt, and CNR closed at HK$6.87, up less than 1 per cent. Turnover of CSR and CNR shares jumped to HK$409 million and HK$336 million respectively, three to four times higher than on Wednesday.
I think the merger would bring more harm than good
Shares of CSR Times Electric, an indirect subsidiary of CSR, closed 2.3 per cent lower at HK$29.3. Its shares had surged 7.7 per cent before trading was halted on Thursday following media reports that a merger was on the cards.
Trading in the three companies was suspended on Thursday after a mainland newspaper reported that the State-owned Assets Supervision and Administration Commission was looking to merge CSR and CNR to prevent the two from competing for orders overseas and to facilitate overseas sales of the mainland's high-speed rail technology.
The report said the latest merger proposal had come from the State Council and was still in an initial stage, meaning the two companies had not yet negotiated on the matter.
CSR and CNR issued statements on Thursday night saying they had not submitted plans for a merger and nor had they received instructions to do so from the authorities. CNR also mentioned that the reorganisation and merger of state-owned enterprise was subject to decisions of "the relevant authority".
"The merger news might be overstated," said Lawrence Li, an analyst at UOB Kay Hian. "I think the merger would bring more harm than good as a monopoly may hinder innovation."
Li said the two train makers had strength in different overseas regions and their markets did not entirely overlap. However, last year's competition for orders in Argentina between the two had alarmed the industry.
He said exporting high-speed rail technology would bring more business opportunities to the mainland's rail industry, and would benefit train makers such as CSR and CNR more than railway construction contractors.
