Rail equipment shares plunge after train crash

HONG KONG/SHANGHAI, July 25 – Shares of China rail equipment makers fell as much as 16 percent on Monday after a deadly train crash at the weekend triggered concerns about the safety of China’s fast-growing rail network.

Shares of China South Locomotive and Rolling Stock Corp Ltd(CSR), the maker of the trains that collided over the weekend, fell as much as 16 percent to its 12 month low of HK$5.85, but regained some of that loss to trade at HK$6.43 at 03:19 GMT.

Shares of China Northern Locomotive, which dominates China’s train equipment market with CSR, fell 6.5 percent in Shanghai.

Shares of Chinese airlines gained sharply as investors hope more travellers would take to the sky after the fatal train cash in eastern China.

Air China, the country’s flag carrier, rose more than 4 percent, while China Southern Airlines and China Eastern Airlines gained 4.4 percent and 4.8 percent, respectively.

Morgan Stanley said after the train crash that it believed the share price of CSR would fall in absolute terms over the next 15 days.

“We retain a positive long-term view on the outlook for China’s rolling stock segment but think that, in the short term,industry stocks will de-rate due to investors’ concern on China high-speed rail’s outlook and high-speed rail’s passenger turnover may decrease in the short term,” said Kevin Luo in aresearch note on Monday.

China has been on a building boom in the past few years,hoping to expand its national rail network and turn it into aglobal leader using the latest in technology. Under Beijing’s five-year plan to 2015, the country will invest between 3.6 trillion and 4 trillion yuan ($540-607billion) in its rail sector.

The crash Saturday involved trains made by China South Locomotive and a spokesman there said the train had been inservice since 2009 with no problems.

“The quality of the trains is fine. Neither had anyaccidents previously. It’s the signaling system that went wrong.”

china daily

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