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China Cosco shares double in Shanghai Debut

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    BEIJING, June 27 -- Shares of China Cosco Holdings Co, Asia's largest container line, nearly doubled in their Shanghai trading debut Tuesday on prospects that its parent will transfer the dry-bulk shipping assets to the company.

    China Cosco's yuan-denominated A shares closed at 16.38 yuan, 93 percent above the initial public offering (IPO) price of 8.48 yuan. The company, which is the flagship of State-owned China Ocean Shipping (Group) Co, raised 15 billion yuan from its IPO.

    Analysts said the debut price was in line with market expectations.

    "If China Cosco acquires the dry-bulk ships from its parent, as announced in March, its share prices could get even higher," said Xie Congjun, an analyst with CITIC Securities.

    International dry-bulk shipping rates are expected to stay at a high level this year due to strong demand and slow growth of dry-bulk fleet, Xie said.

    The Baltic Dry Index, the main indicator for the shipping costs of "dry goods", such as iron ore, grain, coal and steel, hovered around 5,030 on average during the year's first five months, Xie said.

    The global fleet expansion in recent years has been concentrated on supertankers and container ships. The dry-bulk fleet will see the slowest rate of increase at 6 percent this year, according to data from Worldyards.com Pte Ltd, a Hong Kong- and Singapore-based research and consulting group that focuses on shipbuilding.

    China Ocean Shipping (Group) Co, the parent company, owns 407 dry-bulk ships with a total capacity of 30.7 million deadweight tons by the end of last year, the largest in the world.

    "But if there are no concrete steps toward the asset transfer in the following months, its share price will probably drop sharply because container shipping price fluctuation is the biggest risk," Xie said.

    Container shipping is China Cosco's core business, contributing over 90 percent of its revenue. Its shipping capacity ranks the largest in China and the fifth biggest in the world.

    China Cosco's net profit dropped 64 percent last year mainly due to an international downturn in container shipping prices.

    The annual capacity growth rate of global container ships is forecast at 12 percent by 2010, but the demand will only grow by 7 percent annually, said Li Lei, an analyst with CITIC China Securities.

    China Cosco's performance is also sensitive to the possible appreciation of the renminbi as well as oil price increases, analysts said.

    The company's H shares were down 6.3 percent yesterday at HK$10.68.

    The Shanghai Composite Index closed at 3,973.37, up 0.82 percent.

(Source: China Daily)

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