China railway shares slump after deadly crash

Chinese railway stocks slumped on Monday after a deadly train accident at the weekend fuelled concerns over the safety of the country's rapidly expanding high-speed rail network. Saturday's crash on the outskirts of the eastern city of Wenzhou killed at least 36 people and injured nearly 200, triggering a nationwide safety overhaul and the sacking of three senior railway officials. Shanghai-listed shares of China South Locomotive and Rolling Stock (CSR), which confirmed the two trains involved in the collision were made by its joint venture with Canada's Bombardier, dived 8.9 percent to close at 6.06 yuan ($0.93) in Shanghai. Hong Kong-listed shares of CSR closed down 13.81 percent at HK$5.99 ($0.77). "The railway ministry is investigating the reason of the accident and we will closely monitor the development," a CSR spokeswoman, who declined to be named or provide further comment, told AFP. Shanghai-listed shares of China North Locomotive and Rolling Stock (CNR), another major Chinese rail equipment maker, tumbled 9.7 percent to 5.87 yuan. The benchmark Shanghai Composite Index dropped 2.96 percent in the biggest single-day fall since January 17, when it shed 3.03 percent. Analysts said the accident, in addition to several delays caused by power outages on the newly opened $33 billion high-speed line between Beijing and Shanghai, would make the bullet trains less attractive than air travel. "The accident hit the reputation of high-speed rail. Now the competitive balance is starting to be tilted towards airlines," said Jia Xuefeng, an analyst at Beijing-based TX Investment Consulting. Shares of China Eastern Airlines rose 1.19 percent to 5.09 yuan while China's biggest carrier China Southern Airlines was down 0.38 percent at 7.95 yuan, reversing earlier gain of as much as 1.5 percent. Analysts said the crash would ease investment in China's high-speed rail network after former rail minister Liu Zhijun was sacked in February for "serious disciplinary violations," words typically referring to corruption. "The railway ministry is expected to attach more attention to the safety of railway operations and the pace of railway construction will slow down further," analysts at Guotai and Junan Securities said in a note. China has invested heavily in its high-speed rail network, which reached 8,358 kilometres (5,200 miles) at the end of 2010 and is expected to exceed 13,000 kilometres by 2012 and 16,000 kilometres by 2020.