China Cosco Holdings Co, operator of Asia's largest container line, sold 15 billion yuan (US$1.97 billion) of stock in Shanghai to buy new ships.

Investors bought 1.78 billion shares at 8.48 yuan each, the top end of the price range, on Monday, the company said in a Shanghai stock exchange statement today. The sale was the fourth biggest in China this year, according to Bloomberg data.

The company plans to use the funds to help its container-shipping unit pay for 12 new ships and to buy a stake in a logistics company. Shipping lines are adding more vessels as Wal-Mart Stores Inc and other retailers sell more Asian-made clothes, toys and televisions in the US and Europe.

"The company needs to fund the expansion of its fleet and raising money in China is very easy right now," said Ji Lijun, an analyst at Shanghai Securities Co." The move is also in line with the government's directive to list more state-owned companies on mainland stock markets."

The Tianjin-based company 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.

China International Capital Corp arranged the sale.

Chinese companies have sold more than 130 billion yuan (US$17 billion) worth of shares in Shanghai and Shenzhen this year.

Ping An Insurance (Group) Co, the nation's second-largest insurer, raised 38.9 billion yuan in February in the largest domestic share sale this year.

China Cosco plans to spend 6 billion yuan of the sale proceeds on new vessels it has already ordered, according to a share sale document. It will also use 1.68 billion yuan to buy a 51 percent stake in Cosco Logistics from its state-owned parent Cosco Group and another 401 million yuan for projects being developed by the logistics unit.

China Cosco had a total of 26 container vessels on order at the end of 2006, with a combined capacity of 166,320 twenty-foot boxes, it said in March. Its Cosco Container Lines Co unit operated 139 vessels with a combined capacity of 399,237 twenty-foot equivalent units at the end of last year.

The price of ships is climbing because of higher demand. A new vessel able to carry 6,200 20-foot standard containers cost a record US$105 million last month, 4 percent more than at the end of 2006, according to Clarkson Plc, the world's biggest shipbroker. Shipowners ordered a record US$105.5 billion worth of new vessels last year, according to the London-based company.

Container-shipping rates have also gained this year. The Howe Robinson Container Index, which tracks the charter market for container-shipping lines on a weekly basis, stood at 1254.3 on June 13, according to the Korea Maritime Institute. That's the highest since September 20.

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"The outlook for the container-shipping industry has improved as freight rates are recovering," said Karen Chan, an analyst at Credit Suisse Group in Hong Kong. ``Hong Kong-listed mainland companies selling A shares in the domestic market are also popular among investors. China Cosco is no exception."

China Cosco raised HK$9.52 billion in an initial public offering in Hong Kong in June 2005. The shares, which rose 2 percent to HK$11.10 at 10:15am in the city, have more than doubled from their IPO price.

China Cosco aims to find new revenue sources as the launch of new vessels intensifies competition in the container-shipping industry. The global container fleet's capacity may increase about 14 percent over the next two years, while demand may expand 12 percent, Credit Suisse Group said in a February 5 report.

AP Moeller-Maersk A/S, owner of the world's largest container line, had a total capacity of 11.3 million units at the end of 2006, according to Containerisation International.

China Cosco also owns a 51 percent stake in Cosco Pacific Ltd., Asia's third-largest container terminal operator.

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