Sinotrans Shipping Ltd. led a rally among Chinese shipping companies Monday as rival companies connected to China Shipping Group and COSCO Group suspended trading on plans for “major issues.”
Sinotrans surged by as much as 10 percent to its highest level since June 29 in Hong Kong trading and was up 6.2 percent at HK$1.90 at 11:04 a.m. local time. China Shipbuilding Industry jumped 9.8 percent in Shanghai, while China CSSC Holdings was up by the maximum 10 percent limit in Shanghai.
China is considering merging China Shipping Group and COSCO Group, its two major shipping companies, amid a broader overhaul of inefficient state-run companies to bolster an economy growing at the slowest pace in more than two decades, according to people familiar with the matter. Overcapacity has kept shipping rates sluggish for years, while shipyards now are struggling with declining orders.
“They’re trying to grow their economies of scale to better compete with their bigger rivals,” said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. “By combining the two they will be able to offer their customers more services and major routes,”
The government may combine the two companies or merge some of their operations, according to the people, who asked not to be identified because the deliberations aren’t public.
China Cosco Holdings Co., China Shipping Container Lines Co. and China Shipping Development Co. are among connected listed entities that suspended trading in their Hong Kong and Shanghai shares from Monday.
— With assistance by Clement Tan