Greek cancellation at Yangzijiang

Singapore: Yangzijiang Shipbuilding (Holdings) Ltd has terminated a contract with Greek shipowner FreeSeas Ltd after it failed to make payments, which may weigh on its stock price, DBS Vickers said.

The cancelled contract was for Yangzijiang to build two bulk carriers for FreeSeas.

Although the orders from FreeSeas account for only 1% of Yangzijiang's $4.5bn order book, "the cancellation will still be negative on sentiment as this is Yangzijiang's first contract cancellation on default," said DBS Vickers in a report.

It added that among the Singapore-listed shipyards, COSCO Corp Singapore Ltd has the highest exposure to Greece and Europe, with more than 60% of its orderbook from the region, while Yangzijiang will be the least affected among Chinese yards.

DBS advised investors to avoid COSCO's shares, which are likely to underperform the market on concerns about their European exposure.

"We believe the cancellation is a reflection of tightening in ship financing as European banks become more selective in lending, while Chinese banks have not stepped in to fill the gap," said Credit Suisse.  [21/06/12]

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