Chinese Bullet-Train Crash
China’s stocks fell the most in two months as railway shares plunged after a deadly bullet-train accident, while political stalemate over the U.S. debt limit boosted concern the world’s biggest economy will default.
CSR Corp. and China CNR Corp., the nation’s biggest train makers, tumbled more than 9 percent after the weekend train collision killed at least 36 people and prompted the government to order a rail safety inspection. China Vanke Co. led declines for developers as Credit Suisse Group AG said the accident may damp demand for real estate in cities along new railway lines.
“The train crash may trigger an investment cut in railway construction,” said Tu Jun, a strategist at Shanghai Securities Co. “The failure to reach agreement on the U.S. federal debt limit is hurting investors’ confidence in the economic recovery. All the weekend news is bad for stocks.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 64.33 points, or 2.3 percent, to 2,706.46 at 2:06 p.m., the most since May 23. The measure dropped 1.8 percent last week, the first decline in five weeks. The Shanghai index has slumped 3.6 percent this year, compared with a 0.5 percent retreat for the MSCI Emerging-Markets Index, on concern the government’s efforts to curb inflation will hurt economic growth.
The central bank has raised interest rates five times and the reserve-requirement ratio 12 times since the start of 2010 to stem inflation. Consumer prices rose 6.4 percent in June, the fastest pace in three years, as food costs increased.CSR plunged 9.1 percent to 6.03 yuan, set for its lowest close since Oct. 29. China CNR dropped 9.4 percent to 5.89 yuan, the biggest decline since its listing in December, 2009. Gem- Year Industrial Co., which makes carriage components, fell by the 10 percent daily limit to 16.65 yuan.
China ordered a two-month inspection of rail safety and fired three officials after at least 36 people were killed in a high-speed train crash two days ago near the eastern city of Wenzhou. The collision will slow the pace of railway construction, according to Guotai Junan Securities Co. The growth of equipment companies will be affected, it said. The railway ministry will postpone auctions for equipment, Shenyin & Wanguo Securities Co. analysts said, cutting their stock ratings for CSR and CNR to “neutral.”
China Vanke, the nation’s largest developer by market value, slid 3.1 percent to 8.16 yuan. Poly Real Estate Group Co. slipped 3.3 percent to 10.37 yuan.The train accident, along with “constant malfunctioning” of the Beijing-Shanghai bullet train, may damp demand for property in cities along new railway lines, Credit Suisse said.
Land sales in “several” cities along the new Beijing- Shanghai high-speed railway line surged in 2009 and 2010, analysts including Jinsong Du at Credit Suisse wrote in a report.
Airlines’ Opportunity
China Eastern Airlines Corp. led a rally for airlines after Barclays Plc said the train crash will spur demand for alternative transport. China Eastern, the second-largest carrier, added 2 percent to 5.13 yuan. China Southern Airlines Co. the biggest carrier, gained 1 percent to 8.06 yuan.
The bullet-train crash will “substantially undermine” people’s confidence in the country’s high-speed rail network and “significantly discourage” usage, according to Barclays.
“We expect travelers to gradually turn to alternative transport means, including expressways,” Patrick Xu and Jon Windham, analysts at Barclays, wrote in today’s report.
Global Economy air yeezy glow in the dark U.S. House Speaker John Boehner told Republicans that there’s no agreement on a plan for raising the ceiling before a default threatened for Aug. 2. A Republican congressional official said Boehner, speaking by telephone to lawmakers, is reporting that discussions are continuing. The impasse has boosted the chance S&P will cut the U.S. credit rating from AAA within three months to 50 percent, the company said July 21.
China needn’t take the risk of a U.S. default seriously as politicians in Washington will reach a deal on the debt limit in the end, said Zhu Baoliang, chief economist at the State Information Center, a state-backed research organization in Beijing under the National Development and Reform Commission.Although the stalemate in the talks over the debt limit is “not good news for big creditors such as China and Japan, there’s not much they can do,” Zhu said in a telephone interview with Bloomberg News today.PetroChina Co., the nation’s largest oil producer, lost 2 percent to 10.37 yuan, set for its lowest close since Sept. 30. Jiangxi Copper Co., the biggest copper producer, slid 2.4 percent to 34.91 yuan.
Moody’s Investors Service cut Greece’s sovereign credit rating by three steps today, saying the European Union’s financing package for the debt-laden nation implies “substantial economic losses” for private creditors. nike air yeezy black pink glow in the dark Greece’s long-term foreign currency debt was downgraded to Ca from Caa1, the ratings company said in a statement in London. Moody’s assigned a developing outlook to the ratings and said it will re-assess the credit risk profile of any outstanding or new securities issued by the Greek government after Greece’s debt exchange has been completed.
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