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China Railway Gains as Crash Report May Revive Construction

Sept. 16 (Bloomberg) -- China Railway Group Ltd., the nation’s biggest builder of train lines, rose the most in three weeks in Hong Kong on speculation the end of an investigation into a fatal high-speed crash may revive orders.

The builder gained 2.8 percent, the biggest increase since Aug. 29, to HK$1.85 at close today. China Railway Construction Corp. rose 2 percent to HK$3.50 and trainmaker CSR Corp. advanced 3 percent to HK$3.84.

“There is speculation that orders for rail builders and equipment providers may rebound after the official release of the investigation,” said Karen Li, a JPMorgan Chase & Co. analyst based in Hong Kong. The findings are due to be published around mid-September.

The report will say that a primary reason for the July 23 bullet-train accident was a software error that caused a signaling system to fail after a lightning strike, Liu Lianguang, a professor at North China Electric Power University and a member of the investigation committee, said today. Railway construction spending in China tumbled 50 percent last month as the government awaited the result of the probe into the crash that killed 40 people.

China Railway Group and China Railway Construction have both plunged about 40 percent in Hong Kong since the accident on concerns it may damp the nation’s investment in new tracks. The government intends to spend 2.8 trillion yuan ($439 billion) on railways under a five-year plan ending 2015, which will boost the total network to 120,000 kilometers (75,000 miles).

To contact the reporter on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

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