Railway shares steam ahead

CHINA Railway Group Ltd, the nation's largest construction company, may raise as much as US$4 billion in Shanghai and Hong Kong share sales by next month, said two people familiar with the plan.

The Beijing-based company, which built the world's highest railroad, may sell a combined 40 percent stake in the offerings, said the people, who declined to be identified because the information is not yet public.

China will invest 3.8 trillion yuan (US$510 billion) improving transport infrastructure in the five years ending 2010 to meet demand in an economy that grew 11.5 percent in the third quarter, according to a November 2006 report from UBS AG. China Communications Construction Co, the world's largest port builder, went public in Hong Kong in December 2006.

"China's railway industry is entering a period of unprecedented expansion," said Wang Ren, a Hong Kong-based analyst of CCB International Securities.

China is encouraging construction companies to raise capital through the stock market to help ease a funding bottleneck that stunted industry growth in previous years, and after an expanded equity market proved capable of accommodating share sales by large state-owned enterprises, Wang said.

Chinese companies have raised US$52 billion selling shares domestically this year, more than in the previous five years combined, according to data compiled by Bloomberg. Equity offerings in Japan amounted to US$19 billion this year.

The state-owned China Railway was restructured from China Railway Engineering Group Co in September.

It plans to sell no more than 4.68 billion new yuan-denominated Class A shares, or a 26.8 percent stake, in Shanghai.