China Rail Stocks Rise on Investment Report: Hong Kong Mover

China’s two biggest railway builders jumped in Hong Kong trading today on an HSBC Holdings Plc report that the Chinese government will increase railway investment by at least 23 percent to support economic growth.

China Railway Group Ltd. (390) surged as much as 11 percent, the biggest gain in more than two years. China Railway Construction Corp (1186) gained as much as 8.4 percent. The city’s benchmark Hang Seng Index rose 0.6 percent.

China Railway Corp., the state monopoly that owns the train network, said April 30 that the investment budget for this year will be boosted to 800 billion yuan ($128 billion) from a previous spending plan for 630 billion yuan to 650 billion yuan, HSBC analysts led by Lesley Liu said in a note yesterday. The Chinese government last month outlined a package of measures including tax relief and railway spending as a slowdown endangered its 7.5 percent economic growth target.

“Given the magnitude of increase, we believe both construction companies and rail equipment manufacturers will benefit,” HSBC’s Liu said in the note. The increase is “significantly higher than market expectation,” according to the report.

Two calls to China Railway Corp. were unanswered today during a Chinese public holiday.

CSR Corp. (1766), a Chinese trainmaker, gained 9.4 percent to close at HK$6.19 in Hong Kong trading. China Railway Group rose 9.3 percent to HK$3.77. China Railway Construction advanced 7.3 percent to HK$6.88.

The government’s focus in 2014 and next year will be the completion of existing tracks to meet its target under a five-year plan through 2015, HSBC analysts said.

China Railway Corp. took over the nation’s rail network last year after the government dismantled the Ministry of Railways to battle graft and bureaucracy.

To contact the reporters on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net; Billy Chan in Hong Kong at bchan101@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Stanley James

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