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Hot List Party
Stars attends the TV Guide Magazine's Hot List Party in Los Angeles November 10, 2009.
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Markets
Rail shares edge up on Buffett bet
By Liu Yiyu (China Daily)
Updated: 2009-11-11 08:41
Billionaire investor Warren Buffett's purchase of US rail freight giant Burlington Northern Santa Fe Corp has spurred a rally in Chinese railways-related stocks, especially transportation and construction firms, and come as a shot in the arm for the sector.
Shares of railway transportation companies Daqin Railway Co, China Railway Tielong Container Logistics, Guangshen Railway and Good Hand Railway rallied after the announcement, with Railway Tielong Container Logistics and Guangshen Railway jumping by 7.95 percent and 6.02 percent, respectively, yesterday.
Even railway construction companies such as China Railway Construction Corp (CRCC), China Railway Group and China Railway Erju Co have edged up, boosted by higher expectations of the sector.
Revenue at these railway construction firms has been growing steadily thanks to the massive stimulus allocated to the infrastructure sector. CRCC's orders surged by 80 percent in the third quarter and its revenue has been forecast to grow by 21.5 percent this year, according to a research note by Guosen Securities.
The State-owned railway infrastructure enterprise also recently won orders worth 6 billion yuan ($878.90 million), accounting for 2.64 percent of its 2008 revenue.
Daqin, the rail transporter, is believed to have received an assets injection that could boost its earnings by 10 percent.
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"Despite double-digit growth, revenue at railway construction companies plunged this year compared with the peak period last year and the year before," said Qiu Bo, an industry analyst at Guosen Securities. "The next two years will only see mild growth in railway construction."
"Railway construction can get a boost by new orders that are created by the stimulus package for the infrastructure sector, while railway transportation would directly benefit from a real economic recovery," Qiu said.
Railway transportation has not shown significant improvement in fundamentals. Profits at Guangshen Railway dropped by 2.7 percent during the first nine months of this year. Analysts at Shanghai Securities said this could change if there is a pickup in the real economy.
