Photo Credit: China Commodity Net
China South Locomotive reached a boom with a recent IPO. The company was looking to sell 3 billion new shares for a price of 2.18 yuan each, but when it went to make the sale, the company received offers totaling 2.27 trillion yuan for only 6.54 billion yuan in new stock. The company was happy with the success, getting offers of 50 times more than it had raised.
Interest in China’s railways are huge, as it holds the reign as being the cheapest and best way to transport goods from one region of the country to another. China’s manufacturing centers are producing like wild and need a cost effective way to ship goods while competing with a $118 a barrel price for oil. China South Locomotive is the biggest railcar producer in China.
Plenty of room to grow
Investing in railways in China is big business with plenty of room to grow; obviously individual investors and institutions were very interested in getting in on the transportation boom. The company is poised to profit on additional gains in transporting in China, as it producers railcars and rapid transit vehicles that are in huge demand in the quickly growing economy. China South Locomotive racked up the biggest single IPO since Jinduicheng Molybdenum Co.’s IPO attracted 8.9 Billion yuan in April.
IPOs still drawing attention
The fact that China’s IPOs are still drawing attention gives confidence to investors, even as the CSI 300 index has dropped nearly 50% from its highs. Speculators have fled Chinese stocks, but long term investment is still flowing into the country, causing inflation and worrying the Chinese government that they might lose the competitive advantage in pricing. The yuan has yet to correct against the US dollar and is gaining at a rate that might cause Chinese exports to lose out against US manufacturers.