CHINA South Locomotive & Rolling Stock Corp surged 58 percent in its Shanghai trading debut yesterday, buoyed by strong investor appetite given its leading position as the nation's top train maker despite a broad market slump.

Its shares hit an intraday high of 4.00 yuan (58 US cents) before closing at 3.45 yuan, a huge jump of 58.26 percent from its offer price of 2.18 yuan.

The Shanghai Composite Index lost 5.34 percent to 2,319.87, or more than 60 percent off its record peak reached in mid-October last year.

Beijing-based China South, which accounts for about half of the nation's railway and rapid transit vehicle market, raised a combined US$1.48 billion in Shanghai and Hong Kong initial public offerings to fund expansion and technology upgrades. Its Hong Kong shares will begin trading on Thursday.

"A stellar performance on its first day may not be favorable for its long-term development,'' said Wen Lijun, an analyst with Nanjing Securities. ''The overseas markets would be less enthusiastic about the IPO, so the debut in Hong Kong may put pressure on China South's A shares (in Shanghai)."

China South's local-currency A share debut marked the second-best first-day performer this year on the Shanghai Stock Exchange, following Zijin Mining Group Co's 95-percent surge in April.

It was also the first major stock listing on Chinese mainland exchanges since April as the securities regulator has tightened the pace at which new offerings are launched to avoid huge cash calls in an already sluggish market which has been hurt by concerns of slowing economic growth.

Still, the industry outlook is positive for China South as the government announced it would upgrade the nation's rail network, which had lagged national economic growth over the past years. The government has earmarked 1.2 trillion yuan for the rail sector over five years through 2010, more than four times the budget in the previous five years.

Profit will more than double to 1.36 billion yuan this year, its listing prospectus said. The Shanghai offer price gave South Locomotive a price-to-earnings ratio of 16 times forecast 2008 earnings, against global rivals General Electric Co's 13.4 times and Siemens AG's 17.1 times, according to Bloomberg data.