Cosco / Yangzijiang

Cosco / Yangzijiang: Recall recent newsflow that Nasdaq-listed FreeSeas, a Greek shipowner, has defaulted on payments for two newbuild bulk carriers being built by Yangzijiang, after its financier ABN Amro terminated the financing agreement for the newbuild vessels. DBSV says while the financial impact of the cancellation of the two vessels is small, accounting for only 1% of YZJ's order book of US$4.5b (96 vessels), the cancellation will still be negative on sentiment as this is YZJ's first contract cancellation on default (even during the 2008-09 crisis, none of YZJ's contracts was cancelled). Notes, among the SGX-listed yards, Cosco has the highest exposure to Greece and Europe at > 60% of orderbook while Yangijizang would be the least affected among Chinese yards. Adds, avoid Cosco shares, as they are likely to underperform the market on concerns about their European exposure.