Trainmakers CNR, CSR suspend shares following merger report

China’s two biggest train manufacturers CSR Corp. and China CNR Corp. halted their shares from trading after Caixin magazine reported that the Chinese government wants to merge the two companies.
CSR suspended trading pending clarification of a media report, the company said in a statement to the Shanghai Stock Exchange yesterday. Shares of both companies were halted in Hong Kong and in Shanghai. Zhuzhou CSR Times Electric Co., a CSR unit that makes railway equipment, also stopped trading of their stock in Hong Kong.
China’s State-Owned Assets Supervision & Administration Commission, or SASAC, is seeking the merger of the two companies to help the export of China’s high-speed railway technologies, Caixin reported on its website Wednesday, citing people it didn’t identify. The proposal was still in the early stages because China Railway Corp., the state monopoly that owns the rail network, opposes the move, the magazine said.
China CNR board secretary Xie Jilong declined to comment when reached by phone Wednesday. Two phone calls seeking comment from CSR Corp.’s investor-relations department went unanswered.
China CNR gained 1.8 percent to HK$6.81 in Hong Kong trading Wednesday while CSR advanced 0.7 percent to HK$7.14.
China is expanding the world’s largest high-speed rail network as a tool to sustain the country’s three-decade economic boom. In December, CSR and China CNR won bids for 258 bullet trains worth as much as 44.3 billion yuan (USD7.3 billion) to serve the expending network. CSR builds high-speed trains on its own and in a venture with Bombardier Inc.
China Railway Corp. said in April that this year’s investment budget would be raised to 800 billion yuan, up from a previous plan of 630 billion yuan to 650 billion yuan, according to a note by HSBC analysts led by Lesley Liu.
China is competing aggressively for overseas rail projects, targeting emerging markets, such as Africa, eastern Europe, Latin America and Southeast Asia. Premier Li Keqiang has touted the country’s rail equipment, engineering and construction companies during overseas trips, signing several deals along the way.
In June, CSR reached an agreement to sell six bullet trains to Macedonia, its first European deal. Both CSR Corp. and China CNR Corp. have train-assembly facilities in South Africa. Bloomberg

Clement Tan