China may be set to make its first high-speed train orders in more than a year following a deadly crash, according to several analysts. It's wasn't just the crash, it's a mountain of debt the Rail Ministry is buried in. Of late, pressures have eased, and the ministry may have a better time trying to issue bonds. Is the news already priced into Hollysys (HOLI)?
Reminding of the massive fiscal stimulus credited by some with lifting the globe out of recession in 2009, China may double in H2 the money thrown at its railway system in H1, according to the NDRC. This is the first of what will be a series of signs of greater-than-expected stimulus, says Nomura's Zhang Zhiwei.
"The domestic economy remains beset by ... imbalanced and unsustainable development," says China Railway Group, who, along with China Railway Construction expects lower revenues and earnings in 2012 amidst a sharp fall in national railway spending. "Aggressive," is Daiwa's description of even the reduced revenue projections.
A 1K foot collapsed section of high-speed rail track amidst heavy rains in China throws more concern onto the quality of the system's construction. At issue is the base material used in construction, not the first time this has been a concern. Rail stocks in Shangahai/Hong Kong: China Railway Group (CRWOY.PK) -5.4%, China Railway Construction (CWYCF.PK) -7.3%.
China delivers its report on its high-speed rails following July's deadly crash, saying the system was built with faulty equipment, poorly managed, and plagued with corruption. Safety concerns combined with overwhelming debt have led China to put the brakes on a system in which it was spending $45M/day in recent years.
Workers without pay, massive amounts of idle machinery, and thousands of miles of uncompleted track are the results of a sudden shutdown in China's high-speed rail program. July's deadly crash in Wenzhou put a fork in rail investment that was already slowing under the weight of massive debt.
China suspends more than 80% of existing railroad construction projects in the wake of July's fatal high-speed rail crash and last week's collision on Shanghai's line. Safety is an obvious concern, but the alarming debt load of the Railway Ministry weighs as well. "Almost all banks have stopped lending for railway construction," according to a source.
Chinese stocks plummet - the Shanghai composite -3% - in wake of the train crash leading to questions about the safety of the high-speed-rail system. China Railway (CRWOY.PK) -6.7%, China Railway Construction (CWYCF.PK) -6.7%. Chinese airline stocks soar. Air China (AIRYY.PK) +3.6%.