Experts do not see this continuing for long
Domestic train producer CRRC Corporation Limited (CRRC), which was formed from a merger of State-owned enterprises CSR Corporation Limited (CSR) and China CNR Corporation Limited (CNR), saw its share price surge by the daily trading limit of 10 percent on the day its stocks resumed trading on the stock markets on Monday.
But the company's share price rise is not likely to continue for a long period of time, experts said Monday.
CRRC's share price surged 10.2 percent to 32.4 yuan as of the trading close on Monday, following CSR's announcement on June 1 that CSR's stock abbreviation had been changed to CRRC, and the stocks would resume trading on domestic stock markets on Monday.
The CSR also confirmed that it had merged with CNR into CRRC, according to a separate announcement of the company on May 26.
CSR stopped stock trading on October 27, 2014. On December 30, the company announced that it would merge with CNR. The stocks of CSR and CNR resumed trading on December 31.
On May 7, CSR's stocks stopped trading again, following an announcement by the company on April 29. On May 20, the stocks of CNR were delisted.
The merger between CSR and CNR has inspired strong rises on China's stock market. From October 27 to May 7, the share prices of CSR had surged by more than 400 percent. The CNR also saw its share prices climb by more than 350 percent during that period of time.
Xi Junyang, a professor with the Department of Finance at the Shanghai University of Finance and Economics, told the Global Times on Monday that China's A-share markets are predisposed to inertia, and domestic investors' interest in CSR as well as CNR stocks in recent months has driven up the prices of CRRC stocks after they resume trading.
"Since China's A-share markets are showing a persistent bullish trend, domestic investors are still confident that CRRC stocks will rise, following the A-share stock markets trend in general," Xi noted.
He also stressed that the consolidation of CSR and CNR would largely enhance the competitiveness of the two corporations in a global context.
"Domestic investors are confident of CRRC's business performance in the future," Xi said.
According to a report on the financial website finance.ifeng.com on June 1, CRRC has a market value of around 800 billion yuan ($129 billion), making it the largest railway equipment manufacturer in the world.
A financial commentator surnamed Yu, who declined to give his full name, told the Global Times on Monday that the share price hike of CRRC stocks would not last for long.
"The share price fluctuation of CSR and CNR stocks in recent months has been abnormal, and since the consolidation has been completed, the share price of CRRC should return to normal," Yu said.
Xi also echoed Yu's views in saying that the share prices of CRRC would continue to rise for a maximum of two weeks and then fall amid fluctuation.
Domestic analysts have also seen the merger as the beginning of a wave of consolidation among State-owned enterprises (SOE).
The task of SOE reforms by the central government has became increasingly clear, with the government having already approved four documents on SOE reforms this year, the China Securities Journal reported on Monday.
The report also said that the government might launch an official top-level scheme on SOE reforms in the near future.
The impact of approaching SOE reforms on China's capital market has also manifested.
On Friday, the Shanghai Composite Index surged above 5,000 points, and the share prices of companies related to SOE reform climbed by around 3 percent on average.
Xi said that the share price hike of the successor to CSR and CNR is sure to be duplicated in the stocks of other State-owned enterprises if they are to be merged.
"As long as there's a merger, and that merger is thought to increase the competitiveness of the involved companies, Chinese investors will bet their money on the stocks of those companies," he noted.
