China Shipping Shares Diverge After Consolidation Plan

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December 26, 2015

By Bloomberg News

(Bloomberg) — Chinese investors got their first opportunity to react to a plan for consolidating the nation’s two state-owned shipping groups when shares of their listed units resumed trading Friday. They promptly pushed two of the stocks down by the daily limit in Shanghai trading while bidding another up by as much as 8 percent.

China Shipping Container Lines Co. ended trading down 4.2 percent and China Cosco Holdings Co. declined 4.8 percent after both had earlier fallen by as much as the 10 percent daily limit on concern the government plan announced Dec. 11 won’t improve their profitability. China Shipping Development Co., which would swap its money-losing dry bulk business for the profitable energy shipping segment, was 6.2 percent higher at the close. The Hong Kong-listed shares had already begun trading earlier this month. The benchmark Shanghai Composite Index rose 0.4 percent Friday.

China Shipping Development’s earnings should be “significantly enhanced” by the plan, Deutsche Bank AG analysts led by Sky Hong wrote in a Dec. 14 note. They called the disposal of its dry bulk operations “a big positive surprise.”

The shares had been suspended for almost five months in Shanghai as Chinese authorities worked out how to make parent companies China Ocean Shipping Group and China Shipping Group more competitive in an industry plagued by overcapacity. Authorities announced Dec. 11 that their assets would be reorganized to form four listed units, each focused on a specific aspect of the shipping business: containers, financing, terminals and oil-and-gas.

Lacking Specifics

China Cosco Holdings would be the listed entity for container shipping, China Shipping Container Lines for shipping financial services, while China Shipping Development would assume the oil and gas transportation business. Cosco Pacific Ltd., which is listed in Hong Kong, would focus on the terminal business. More specific details, including if China Ocean Shipping Group and China Shipping Group will become one entity, have yet to be released.

Cosco Pacific resumed trading on Dec. 14, as did the Hong Kong-traded shares of China Cosco Holdings, China Shipping Container Lines and China Shipping Development. The Shanghai shares didn’t resume trading until today because of additional queries from the exchange that they had to address.

In Hong Kong, China Cosco Holdings ended the first trading day after the consolidation plan was unveiled down 28 percent, while China Shipping Container tumbled 26 percent. China Shipping Development gained 8.2 percent.

©2015 Bloomberg News

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