Seaspan Says Shanghai Listing May Hinge on China Easing Currency Controls

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30 Jun 2010

Seaspan Corp., the New York-listed ship lessor, said currency controls will be a key issue in determining whether it moves ahead with a possible stock offering in China. “If I sell shares in Shanghai I get yuan in return, but yuan are no use to me,” Chief Executive Officer Gerry Wang said in an interview in Shanghai yesterday. “I need to convert them into dollars.”
A Shanghai listing would give the Hong Kong-based company funds to buy vessels as global trade and shipping rates rebound, subject to China’s controls on converting yuan into foreign currencies. HSBC Holdings Plc and Standard Chartered Plc have also said they may sell shares in Shanghai as China considers allowing listings by overseas companies.
“If companies are looking to raise money in Shanghai and then channel it elsewhere, the capital restrictions would be an impediment,” said David Cohen, an economist at Action Economics in Singapore. “Still, the Chinese don’t want to rush blindly into the opening up of financial flows.”
China last year paused efforts to make the yuan more convertible on the capital account to help cope with the global financial crisis. The country restricts currency convertibility to help safeguard the stability of the financial system.
Shanghai’s stock exchange is drafting rules for a board on which overseas companies will be allowed to sell shares, Chairman Geng Liang said in March. The international board still faces legal hurdles as current legislation doesn’t cover many matters related to overseas companies issuing yuan-denominated stocks and bonds, Yao Gang, vice chairman of the China Securities Regulatory Commission, said earlier this month.
HSBC Plan
HSBC, Europe’s biggest bank by market value, aims to raise a “significant amount” through a Shanghai stock listing, Chief Executive Officer Michael Geoghegan said earlier this month. The bank is more likely to sell shares in the city in 2011 than this year, Chairman Stephen Green said in May.
Seaspan rose 0.2 percent to $10.74 in New York trading yesterday. The company has gained 16 percent this year.
Separately, Wang said rising availability of container vessels may mean that cargo-box rates are unlikely to climb any further this year, even as demand recovers from last year’s slump. Spot rates for carrying 40-foot containers from Shanghai to Los Angeles have risen to about $3,000 from less than $1,000 at the start of 2009, he said. Rates may hold at current levels before starting to decline from November when the low season for transpacific trade begins, he said.
Container Imports
Demand for Chinese goods has increased this year as U.S. importers rebuild inventories following cuts last year and as they step up buying in expectation of a stronger yuan. Container imports at U.S. ports may rise as much as 15 percent from last year through October, according to the National Retail Federation, a U.S. trade group.
Seaspan plans to raise about $140 million in equity or capital by the second quarter of 2012, it said in a May statement. At the end of March, the lessor had $1.4 billion of installments remaining on outstanding ship orders. It has secured long-term credit facilities to cover most of this, according to the statement.
The lessor received its 10th new vessel this year on June 4. The company has 52 vessels in service and is due to receive another 17 within the next two years, according to a June 7 statement.
Seaspan’s ships are operated by lines including China Shipping Container Lines Co., A.P. Moeller-Maersk A/S and China Cosco Holdings Co.

Source: Bloomberg