China Shenhua Energy Surges 91% on Debut, Aussie Coal Stocks Capped

“China Shenhua Energy Co., (HKG:1088) the world’s second-biggest coal seller, almost doubled on its first day of trading in Shanghai after investors applied for a record 2.66 trillion yuan ($354 billion) of stock,” reports Ying Lou at Bloomberg.


The shares of China’s coal-darling were oversubscribed by 40 times. The Chinese love shares. It’s probably just a coincidence that Shenhua happens to be in the energy business. After all, in the last three months, the average first-day gain for newly listed shares in China is 269%. By that measure, Shenhua’s 91% gain was… rather modest.

Coal could be the most modest of all the energy commodities. Oil is the most widely traded commodity in the world, and the oil contract the most liquid. But oil, in case you haven’t noticed, is getting pretty expensive (even accounting for the sliding US dollar). China has lots of coal. Oil… not so much.

Bloomberg continues, “The surge gives the coal producer a market capitalization of $173 billion, surpassing Cia. Vale do Rio Doce as the world’s second-biggest mining company. Shenhua will use the proceeds to buy mines and expand output to meet demand in the world’s fastest-growing major economy, where coal prices have jumped to a record. China uses coal to generate 78 percent of its power.”

And Aussie coal stocks? The bottlenecks in Queensland effectively cap export volumes for Australian coal producers. That’s bad for business, if you’re a coal producer.

On the other hand, we took a close look at an Australian engineering and infrastructure firm that’s been contracted to help alleviate the bottlenecks in the rail system in Queensland. You’ve probably heard of it. And if you’re a reader of Outstanding Investments, you’ll definitely hear about it in the next seven days.

Dan Denning
Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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