Railway bonds in China, rocked by crashes and corruption probes five years ago, are among the best performing local corporate notes in 2016 as investors bet on support from a government seeking to develop a high-technology, service economy.
Debt of transport companies including China Railway Corp. gained 4.2 percent this year, the most among 11 industries in a Bank of America Merrill Lynch index. Energy notes returned 3.9 percent and utilities ranked third with 3.6 percent. Property bonds were little changed, the worst performance, amid concern the government is tempering a real-estate bubble.
While the rally in transport bonds has been helped by central bank monetary easing, investors are taking comfort in President Xi Jinping’s support for an industry at the intersection of services, consumer spending and Internet commerce. Alibaba Group Holding Ltd., China’s largest online retailer, saw its revenues surge 47 percent in the quarter ended June 30 from a year earlier as it pushed into rural markets.
“It boils down to the boom of the new economy in China,” said Ken Hu, chief investment officer of Asia fixed income at Invesco Hong Kong Ltd. “The old way of shopping such as going to department stores is being overtaken by e-commerce and this has led to a surge in transportation volumes.”

Transport Gainers