Shenwan Hongyuan Group Co., Ltd. has released a research report noting that market sentiment is shifting toward balanced portfolio allocation, creating investment opportunities in railway company assets. The June Dragon Boat Festival triggered a surge in short-distance travel and intercity commuting, while the proportion of medium-to-long-distance cross-regional travel declined, reducing the average passenger travel distance. Rising oil prices have fueled strong demand for domestic cross-province, long-haul supply chain transport, continuously lifting overall freight turnover. The research firm suggests that two major investment themes for the highway sector could persist throughout the year: the traditional high-dividend yield strategy and potential catalysts from market value management initiatives. Key insights from Shenwan Hongyuan Group Co., Ltd. are as follows:

Market rotation toward balanced allocation opens a window for railway asset investments

Recently, market volatility has increased as some capital seeks stable investment targets. Liquidity conditions have marginally improved, but investor uncertainty about the future has risen, and the equity risk premium has declined in tandem. This enhances the allocation value of the sector.

Rail passenger traffic grew modestly, but average trip distance contracted

In June 2026, national railways completed 379.2 million passenger trips, up 1.6% year-on-year. For the first half of the year, total passenger trips reached 2.348 billion, a 5.0% increase. June passenger turnover was 128.944 billion passenger-kilometers, down 0.6% year-on-year, while the first-half cumulative figure was 826.682 billion passenger-kilometers, up 3.4%. The slower growth in passenger turnover relative to passenger numbers indicates that the Dragon Boat Festival holiday drove a surge in short-distance travel and intercity commuting, reducing the share of medium-to-long-distance trips and shortening the average distance per passenger.

Rail freight volume slightly pressured, but turnover surged

In June 2026, total rail freight volume was 435.76 million tonnes, down 0.4% year-on-year. For the first half, it reached 2.622 billion tonnes, up 2.5%. Freight turnover in June was 321.454 billion tonne-kilometers, a 9.2% annual increase, with the first-half total at 1.8858 trillion tonne-kilometers, up 6.7%. The stronger performance of freight turnover compared to volume reflects robust demand for long-distance cross-province supply chain transport amid rising oil prices, which has lifted overall freight turnover.

Highway traffic fluctuated with holidays, but total freight volume steadily rose

In June 2026, weekly highway truck traffic numbers were 54.35 million, 55.01 million, 50.31 million, and 54.79 million vehicles, with month-on-month changes of -1.85%, +1.22%, -8.55%, and +8.91%, respectively. National highway freight volume reached 3.775 billion tonnes in June, up 3.4% year-on-year, an acceleration from May's 2.1% growth.

Risks to watch include traffic volume declines, operational safety incidents, and interest rate fluctuations.