HONG KONG (MarketWatch) – The Hang Seng Index’s worst week in seven years and a deluge of negative news have so far failed to dent enthusiasm for the $5.4 billion dual listing of China Railway Construction, Asia’s biggest listing of the year.
With the retail portion of H-shares oversubscribed a massive 291 times, even worsening market sentiment and credit woes will be hard pushed to derail this juggernaut. The A-shares listed in Shanghai on Monday, where they rose as much as 31% in initial trading, and the H-shares three days later in Hong Kong.
What, you might ask, makes China’s largest railway builder so coveted?
To grasp the essence of the investment story, consider the scene that greets travelers crossing the Lo Wu border in Hong Kong to Shenzhen. A sea of near-new cars jams the streets, the product of China’s recent automobile boom where in Beijing alone, 1,000 new vehicles join the throng every single day.
Nationwide, China’s road networks that deliver people and goods are grinding to a halt, although it took the transport shambles at the recent Lunar New Year snowstorms to drive that home.
The need for alternative rail networks is plain for anyone to see. China Railway Construction will build them.
It also helps that Hong Kong investors know the construction sector well. Projects often come with steady or guaranteed returns, meaning good money can be made pouring concrete or digging tunnels.
This is also good defensive-sector exposure, all the more sought after by institutions in bearish looking equity markets. Spending here at least should hold up well and be immune from the credit tightening in China as building reliable rail networks is top priority.
A total of 300 billion yuan ($42 billion) is earmarked for China’s railway construction this year as part of a total 1.25 trillion-yuan budget for railway infrastructure investment in its five-year plan through 2010. This is nearly quadruple the levels under the previous five-year