Surge in land transport stocks

The Straits Times reported that SMRT Corp led the land transport stock rally by climbing 14 cents or 10.9 percent to reach an 11-month high of $1.48, with 21.3 million shares changing hands.

ComfortDelGro Corp, also propelled by record earnings, rose by seven cents or three percent to hit a seven-year high of $2.38, with 11.4 million shares transacted.

Its subsidiary, SBS Transit, climbed eight cents or 5.7 percent to reach a seven-month high of $1.40. Its trading volume however, was relatively low at 229,000 shares.

Research houses attributed the sudden surge in interest in these stocks to potential policy changes. The Government has been considering adopting a new operating model for public buses since 2008. And SMRT - the smaller of two bus operators here - has been fairly vocal on advocating a change in recent months.

SMRT has also submitted proposals to the Government for it to migrate over to a new rail financing framework. In it, the Government will own all operating assets, which it will lease to SMRT. This will transform the Temasek-owned company into an asset-light entity with lower depreciation charges and a less lumpy capital expenditure pattern.

Even though such changes have been discussed publicly for several months now, stockbrokers were still surprised by how the stocks surged. "SMRT has risen by 40 percent in less than two months," a trader said. "If the changes are really coming soon, then perhaps the stocks should be suspended before announcement."