Investors still not sold on rail sector

Source:Global Times Published: 2014-1-12 21:18:01

Since the start of 2014, Shanghai-traded shares of China Railway Group Limited have dropped more than 10 percent, extending a slump which has seen the company lose more than 25 percent of its market value over the past year. Meanwhile, A-shares of China Railway Construction Corporation Limited have fared just as poorly.

Some see these losses as a sign that China's rail assets are undervalued, despite a recent industry overhaul. In actuality though, investors have good reason to be bearish on the rail sector.

Rail travel and other services are still not fully marketized. True, ticket prices are becoming more expensive, but the price increases have done little to help rail enterprises patch up their tattered balance sheets. Many companies still rely on government subsidies to stay afloat, a situation which is reflected in the price of rail industry shares.

To win the market's favor, rail companies should slow their investment in new projects and focus on efficiency and service quality.

Based on an article from 21st Century Business Herald.

21st Century Business Herald

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