Midas

China Railway / Midas: UOB Kay Hian has sector report. House note that most investors whom house met in China last wk were sceptical on the investment and financing issues given limited newsflow on the railway reform. Overall, house reiterates the view that financing issue is the reason rather than the result of current railway reform. House positive on the investments in railway, urban transit and potential infrastructure areas given low penetration and urbanisation trend in the medium to long term. Expect investors to continue to take a topdown approach to the sector. Policy direction and macro-economic developments will largely drive share price performance in 2013. Reiterate view that the reform will play an essential long-term role in driving earnings growth and equity returns. House top picks CRG (390 HK) and CCC (1800 HK). Among builders, think China Railway Group (CRG) and China Railway Construction (CRC) are moving in line. We favour China Railway Group (CRG) given its higher exposure to metro lines and potential re-rating on mining assets. China Communications Construction (CCC) is the pick for exposure to local government investment and water conservancy projects.