China's Buffett-backed BYD shares surge on debut (AP)

By ELAINE KURTENBACH, AP Business Writer Elaine Kurtenbach, Ap Business Writer – Thu?Jun?30, 4:53?am?ET

SHANGHAI – Shares in Chinese auto and battery maker BYD Co. jumped 41 percent in their debut on the Shenzhen Stock Exchange on Thursday, despite news that the company's profit fell by 84 percent in the first quarter.

Shenzhen-based BYD's 1.42 billion yuan ($220 million) share offering was aimed at raising cash needed for an expansion mainly focused on an auto research, development and production base.

Its shares gained 7.45 yuan, or 41.4 percent, to 25.45 yuan, performing much better than some other recent lackluster share offerings.

BYD, whose name stands for Build Your Dreams, said the plunge in its first quarter profit was mainly due to weak auto sales. Unaudited results showed net profit in the quarter ended March 31 was 266.7 million yuan ($41.2 million), compared with 1.7 billion yuan a year earlier, it said.

"The performance in the first quarter of 2011 dropped significantly, which was mainly due to a decline in the performance of the automobile business," BYD said in a notice to the Hong Kong Stock Exchange, where its shares already trade. But it also noted weakening sales of rechargeable batteries and cell phone parts.

MidAmerican Energy, a subsidiary of billionaire investor's Warren Buffett's Berkshire Hathaway, owns 9.9 percent of BYD.

The company sold 79 million shares, or a 3.4 percent stake, at 18 yuan each in its offering on the Shenzhen Stock Exchange, the smaller of China's two stock markets.

Local media reports said the company chose to be listed on the small- and medium-size company index to help improve the likely performance of its shares. The company scaled back its original fundraising plans by some 770 million yuan ($119 million), apparently in recognition of relatively weak markets recently.

The Shenzhen Composite Index has lost 9.4 percent in the past three months, as sentiment has been battered by worries over the slowing economy.

BYD's sales of its best-selling F3 conventional sedan have faltered as the once torrid Chinese car market, the world's largest, has cooled in recent months. Efforts to win a wider market for its hybrid electric cars have also made slow progress.

In recent comments to shareholders, Berkshire Hathaway's vice chairman, Charlie Munger, said he was still enthusiastic about BYD, despite its recent troubles, which have delayed its plans to launch car sales in North America.

Munger said BYD's mistake was in trying to double its automotive sales every year for six years in a row. It worked for the first five years, he said.

The company started out making batteries and later shifted to automaking. Recently, it has branched into energy storage systems and bus production.

The strategy reflects an expectation that China will move faster in commercializing use of electric buses than private autos, said a report Thursday in the state-run newspaper Southern Weekend.

Until China develops the infrastructure needed to support wider use of electric vehicles, BYD sees greater promise in sales to government fleets and bus companies, it said.

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Beijing-Shanghai high-speed train makes debut (AFP)

ABOARD THE BEIJING-SHANGHAI EXPRESS (AFP) – High-speed trains linking Beijing and Shanghai made their passenger debut Thursday on a $33 billion track China hopes will help ease its overloaded transport system.

Premier Wen Jiabao declared the link "in operation" at Beijing South rail station before boarding the first sleek-nosed white train that took passengers to Shanghai, the country's commercial hub, in less than five hours.

He said the high-speed line -- launched on the eve of celebrations to mark the 90th birthday of China's Communist party -- would be key to "improving the modern transport system... and satisfying people's travelling needs".

The line, which has been operating on a trial basis since mid-May, halves the rail journey time between the country's two main cities and could hurt airlines on the busy route plagued by delays and cancellations.

"The high-speed train is fast and more convenient than a plane," 38-year-old Xu Yuhua told AFP as she waited with her 10-year-old daughter to board the first departure for Shanghai, which left promptly at 3:00 pm (0700 GMT).

Armed police and regular officers were on high alert at the station, where 10 of the gleaming trains were lined up for departure. Excited passengers posed for photographs in front of the locomotive and outside their carriages.

The fast link, which has been hit by safety concerns and graft, is opening a year ahead of schedule and will be able to carry 80 million passengers a year -- double the current capacity on the 1,318-kilometre (820-mile) route.

"It could play a transformational role in shaping the future economic dynamics in coastal China... by creating more spillover effects to regions lying along the sprawling high-speed railway line," Ren Xianfang, an analyst at IHS Global Insight, told AFP.

But for the airline industry, the impact could be "destructive", she warned.

One-way train ticket prices will cost 410-1,750 yuan ($63-$270) subject to further adjustments, vice rail minister Hu Yadong said this month, compared with about 1,300 yuan for a flight.

In response, airlines have slashed some prices by up to 65 percent to below the cost of the cheapest high-speed rail ticket, state media said Wednesday, citing travel website ctrip.com.

On board, waitresses wearing blue tunics and yellow smiley face badges walked up and down the aisle selling beer, soft drinks and juice -- but the beverages ran out two hours before arrival.

Supplies of instant noodles and pre-packaged meals were stacked high in the cafe car.

A 36-year-old male passenger surnamed Zhang, who was travelling back to Shanghai with colleagues, said he appreciated the extra legroom, noting: "Planes are not as comfortable."

Frederic Campagnac, general manager of transport and logistics consultancy Clevy China, nevertheless believes the fast link will have a positive impact on airlines by forcing operators to be on time.

It will "put pressure on the airlines to keep more on their schedule," Campagnac said.

Work on the high-speed railway started in April 2008 with a planned investment of 220.9 billion yuan.

China is spending heavily on its high-speed rail network, which spanned 8,358 kilometres at the end of 2010 and is expected to exceed 13,000 kilometres by 2012 and 16,000 kilometres by 2020.

But huge investment has also made the sector a hotbed for corruption, raising concerns over costs and safety.

China's state auditor in March said construction companies and individuals last year siphoned off 187 million yuan in funds meant for the Beijing-Shanghai link.

The revelation followed the sacking of former railways minister Liu Zhijun in February, who allegedly took more than 800 million yuan in kickbacks over several years on contracts linked to China's high-speed network.

The railway ministry has said the trains would run between 250 and 300 kilometres per hour on the new link, which is designed for a maximum speed of 380 kph.

The speed is in line with a nationwide directive made public in April that said all high-speed trains must run slower than previously announced -- no faster than 300 kph -- for safety.

"I'm not afraid," a 30-year-old woman from Shanghai surnamed Wen told AFP, as the train accelerated to top speed, whizzing past factories, high-rise apartment buildings, and vast farmlands where peasants worked in the fields.

"The ticket is a little bit expensive but I think the train is more stable than a plane."

Urban areas within 300 to 400 kilometres of Beijing and Shanghai "will become kind of suburbs to the big cities" because it will be possible to do a return trip in one day, Campagnac said.

"All the cities on the way will benefit from the line," he added.

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