Midas

Midas: Over the weekend, China's Xinhua Agency reported that China National Devt and Reform Commission (NDRC) had called on the Govt to meet its railway investment target for 2012. For 2012, China has only invested about 68% of its planned RMB500b rail budget. On a medium term basis, the outlook is more promising - China planned to have 40,000km of high speed rails by 2015. As at Jul12, it has only constructed about 13,000km. A couple of problems have inhibited the roll-out leading to a possible delay in meeting their 40,000km target. The announcement by NDRC is another confirmation that the Chinese Govt will resume rail and rolling stock construction soon. NRA note that while conservative investors would wait for the China Govt elections in early Nov to confirm the resumption of rail contracts, less conservative investors may consider accumulating Midas shares at the current level, as the news so far is pointing to a positive 2013. Deutsche expect more new railyway projects to start construction in 4Q. Note that 22 new railway projects will start construction in 2012, more than expected According to the Economic Information Daily, 22 new railway projects will start construction in 2012 (vs. the original plan of nine new projects with Rmb162b total investment that the MoR announced at the beginning of 2012). There is no detailed information on the investment in the 22 new projects. This now is the second time ytd that the MoR has increased the number of new projects. In mid-Sept, based on MoF data, the number of newly-started railway projects was increased from nine to 19, including the Mengxi- Huazhong coal line. In addition, based on yesterday’s news, MoR has started making monthly checks on construction progress rather than quarterly ones, in order to fulfill the new recently-revised 2012 railway investment plan. Overall, house still positive on the railway sector (especially constructors) due to the accelerating investment in railway infrastructure over the rest of this year and a better outlook for 2013. Potentially higher-than-expected subway spending might further support the sector. CRC and CRG are the biggest beneficiaries in the sector in the short term.