As mentioned on yesterday, I am looking to include a couple of transportation stocks specifically railways into my emerging market Big-Build Out portfolio (BBO). So, I have been surfing the internet to see what I could discover on China railroads. Obviously there is tons of information, but here are a couple of good places to start:
Unfortunately, for U.S. based investors there is only one publicly traded Chinese railroad company – Guangshen Railways (GSH). Others are planning initial public offerings (IPOs) in early 2008. The BBO has been designed to invest in companies that supply expertise and goods to China; as opposed to directly investing in Chinese companies. So, from that perspective GSH would not be a good addition. I will continue my direct investment in Chinese companies through the ETF FXI.
So, where are the companies supplying the expertise and supplies to China?
From what I have gathered so far, China appears to be somewhat open and somewhat closed to foreign investments. They want the money, but want to maintain control. They also see railroad development as clearly an opportunity to showcase their technological innovation. Although some foreign companies such as France’s Alstom, German conglomerate Siemens AG, Canada’s Bombardier Inc. and Japan’s Kawasaki Heavy Industries have had some success selling railway equipment and expertise to China – their preference is clearly on homegrown technology.
I will keep searching, but their may be better opportunities in Brazil. Brazil does not see railroad development as their core competence, but understand that further development is essential to their raw materials exporting businesses. It appears to be much more open to foreign direct investments.