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Comment (The shares rose as high as 17.15 yuan, a premium of about 63 percent to the Hong Kong-listed stock, and traded at 16.68 yuan at 10:57 a.m. The Tianjin-based company sold 1.78 billion A shares, or a 20 percent stake, at 8.48 yuan each to buy new ships and a stake in a logistics company.
The sale drew subscriptions for more than 100 times the stock on offer, as investors ignored concerns about a bubble triggered by an 85 percent surge in the benchmark CSI 300 Index this year. China's rising sea-cargo traffic and investors' preference for companies listed in Hong Kong stoked demand.
``China Cosco has a track record,'' said Mona Chung, who helps manage more than $1.2 billion at Daiwa Asset Management Ltd. in Hong Kong. ``That's why investors are attracted to the shares.''
Mainland-listed stocks trade at a premium to Hong Kong- listed shares, as government regulations prevent investors from buying stocks overseas. The CSI 300 Index trades at around 43 times earnings, compared with a ratio of about 17 for Hong Kong's Hang Seng Index.
China Cosco's Hong Kong-listed shares plunged 5.4 percent to HK$10.78. The stock has more than doubled since June 2005, when the company raised HK$9.52 billion ($1.22 billion) in an initial share sale.
Index Falls
The CSI 300 Index declined 0.8 percent, set for its third straight daily drop and its longest losing streak this year, on concerns about shares being overvalued.
Central bank Governor Zhou Xiaochuan said on June 23 there may not be ``a clear bubble, but we worry.'' He also didn't rule out further rate increases if necessary.
Former Federal Reserve Chairman Alan Greenspan and Li Ka- shing, Asia's richest man, have also said that Chinese stocks may be overvalued.
``The bubble is there, but I don't see any reason for it to burst very soon,'' said Francis Chu, a Hong Kong-based analyst at South China Securities Ltd.
The People's Bank of China has raised interest rates twice this year and five times ordered commercial lenders to set aside more money as reserves to drain liquidity and cool the economy.
Record Demand
China Cosco's Shanghai sale drew 1.63 trillion yuan of demand, exceeding the 1.46 trillion yuan offered for Bank of Communications Ltd.'s 25 billion yuan sale in May. Shares of the bank gained 71 percent on their first day of trading.
Ping An Insurance (Group) Co. shares jumped 38 percent on their March 1 trading debut. The company, China's second-largest insurer, raised 38.9 billion yuan in its share sale, the biggest in the country this year. Overall, Chinese companies have sold more than 120 billion yuan worth of shares in Shanghai and Shenzhen this year.
China Cosco's share sale was the fourth-largest on the mainland this year, according to data complied by Bloomberg. The Shanghai-listed shares were sold at a 20 percent discount to the June 18 closing price of the company's Hong Kong-listed stock.
More Ships
China Cosco plans to spend 6 billion yuan of the sale proceeds on 12 new ships, according to a share sale document. It will also use 1.68 billion yuan to buy a 51 percent stake in Cosco Logistics from state-owned parent Cosco Group and another 401 million yuan for projects being developed by the logistics unit.
China Cosco sold 535 million shares to strategic investors, 356.9 million to institutional investors and 891.9 million to individual investors. Strategic investors have to hold their shares for a year, while the lock-up period for institutional investors is three months, the company said on June 20. China International Capital Corp. arranged the sale.
The shipping company had a total of 26 container vessels on order at the end of 2006, with a combined capacity of 166,320 standard 20-foot boxes, it said in March. Its Cosco Container Lines Co. unit operated 139 vessels with a combined capacity of 399,237 20-foot equivalent units at the end of last year.
China Cosco, China Shipping Container Lines Co. and other Asian shipping lines have ordered vessels because U.S. and European companies are importing more low-cost goods from Asia. Chinese ports' handled 93.6 million 20-foot equivalent units last year, more than triple 2001's tally.
``The outlook for the container-shipping industry in China is positive,'' said Joslyn Ji, a Hong Kong-based analyst at Core Pacific Yamaichi International Ltd. ``Freight rates have been recovering since the beginning of the year and international trade is still growing.''
China Cosco also owns a 51 percent stake in Cosco Pacific Ltd., Asia's third-largest container terminal operator. Chinese ports may handle 170 million containers by 2010, according to information on the Ministry of Communications' Web site.
