China Railway Construction Corp. sank nearly 20 percent in Hong Kong trading yesterday after the Nigerian government suspended its US$8.3-billion railway project in the African country.
China Railway tumbled 18.4 percent to close at HK$7.99 (US$1.03) yesterday, the worst performance since its debut in March this year. Its shares in the Shanghai market plunged 9.23 percent to 7.77 yuan (US$1.13).
The company said in a statement that the Nigerian government had suspended the Lagos-Kano railway project by China Civil Engineering Construction Corp, a subsidiary of China Railway Construction, to redefine the contract scope.
The contract accounts for 13.8 percent of the company's total order value as of September 30. The redefining process may take 90 days.
The project was to build a new 1,315-kilometer dual-track standard railway to connect Lagos in south Nigeria to northern Kano with a designed speed of 150 kilometers an hour. This is so far the biggest project won by a Chinese mainland contractor in the international engineering market.
China Railway Construction has overseas contracts worth 134 billion yuan, which make up 32.7 percent of its total contracts. Most of the projects are located in the Middle East and North Africa.
"We suggest investors should be cautious about potential risks of the international construction business during economic turmoil," said Bai Hongwei, an analyst with China International Capital Co..
"The change in the Nigerian project is within our expectation as the economic situation in Nigeria is highly uncertain," he added.
(Shanghai Daily November 5, 2008)
