Tuesday 22 January 2019

Shipping forecast: China's Cosco mulls London listing as it seeks capital and to enter global system

THE BIG PICTURE

Jonathan Saul and Stine Jacobsen Reuters

China's largest shipping group, Cosco Shipping, is considering raising capital for the first time on the London Stock Exchange through a new initiative with Shanghai's bourse, according to two finance sources familiar with the matter.

China increasingly dominates global shipping routes - seven of the 10 busiest container ports are in the country.

The Shanghai-London Stock Connect will enable Chinese companies to raise fresh money on the LSE through issuing global depository receipts (GDR), which could boost momentum amid concerns that Brexit might dent the City of London's leading position in financial markets.

Meanwhile, Maersk - the world's biggest container shipper - aims to be carbon neutral by 2050, in a challenge to the rest of the world's fossil fuel-dependent fleet.

The shipping industry, which carries around 80 pc of global trade, accounts for 2.2pc of CO2 emissions, the UN's International Maritime Organisation (IMO) says.

But along with aviation, it avoided specific emissions-cutting targets in a 2015 global climate pact which aims to limit a global average rise in temperature.

Back in London, the LSE is hoping to get a boost from China as the world's fastest-growing capital market.

The sources, who declined to be identified citing sensitivity, said Cosco Shipping, which is Shanghai and Hong Kong listed, was examining the possibility of issuing GDRs in London. No decision had been taken yet, partly as it would also require Chinese regulatory approval.

"Any capital raising would be large to make it worthwhile and also to bolster connections with foreign investors," one of the sources said.

The second source added: "For political reasons as well, London would be a preferable capital destination for Cosco rather than New York, for instance." Cosco, which has an estimated market capitalisation in Shanghai of $5.5bn, did not respond to requests for comment.

Developing a tie-up between Shanghai and London is the latest in a series of efforts by China to gradually bring its vast stock markets into the world trading system.

However, the arrest this week of a top executive of China's Huawei in Canada and her possible extradition to the United States has roiled global stock markets on fears the move could escalate a trade war between Washington and Beijing after a truce was agreed days earlier between President Donald Trump and Xi Jinping.

Cosco, which is the world's number three container shipping line, is still contending with pressured markets and has been looking at expanding its activities globally.

Irish Independent

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