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Stocks

State-owned infrastructure builders looking overheated

SHANGHAI -- Shares in China Railway Group jumped Wednesday on word it had won a 20 billion ruble ($406 million) order to build a rail link between Moscow and the Russian city of Kazan.

    The Shanghai-listed stock briefly went up more than 7% on the announcement, made by the company the day before.

     The Russian rail contract counts as an important takeaway from Chinese President Xi Jinping's recent trip to Russia. Xi's "Belt and Road" initiatives, ambitious plans to open transport corridors to Europe, may help China project economic power and drum up infrastructure and export business for its state-owned enterprises.

     Chinese companies' opportunities for investment abroad will increase significantly, predicts Robin Xu, an analyst at UBS.

     Such expectations have been lifting shares in state-owned infrastructure builders, which have pushed up the broader Chinese equity market. With China Railway trading at around 42 times earnings, this segment is looking overheated.

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