Market shrugs off Beijing’s move, with shipbuilder stocks rebounding on easing concerns
Korea’s $150 billion project to support the United States’ shipbuilding sector, dubbed “Make American Shipbuilding Great Again,” or “MASGA,” remains unaffected despite China imposing sanctions on Korean shipbuilder Hanwha Ocean’s US subsidiaries, according to market analysts Wednesday.
The Chinese government on Tuesday announced sanctions against five US subsidiaries of Hanwha Ocean: Hanwha Philly Shipyard, Hanwha Ocean USA International, Hanwha Shipping, Hanwha Shipping Holdings and HS USA Holdings. The sanctions banned all Chinese entities and individuals from cooperating in business or exchange with the subsidiaries, citing that the US restriction on Chinese maritime, logistics and shipbuilding sectors violates international laws and infringes Chinese companies’ legal rights.
Following Beijing’s sanctions announcement, the stock price of Hanwha Ocean dropped to close at 103,100 won ($72.35) per share Tuesday, down 6,300 won or about 5.8 percent from Monday’s closing.
Despite the immediate drop, a series of securities reports were released dismissing the impact the Chinese sanctions will have on Hanwha Ocean.
Shinhan Securities noted that Hanwha Ocean’s US subsidiaries do not have practical cooperation with China, saying that some later stages of the shipbuilding process at Hanwha Philly Shipyard may require Chinese products, but they are only a small portion and can be replaced by sources in Korea, the US, Canada or Mexico.
KB Securities pointed out that only Hanwha Shipping and Hanwha Philly Shipyard are carrying out business activities among the five sanctioned firms. However, the subsidiaries have no personnel or physical ties with China, and the Chinese restrictive measures are expected to have little to no impact on Hanwha and the Korean shipbuilding sector as a whole.
The market responded to the expectation that the Chinese sanctions are likely to have limited effects on Hanwha and Korea’s MASGA initiative as the shares of Hanwha Ocean and two other major Korean shipbuilders — HD Hyundai Heavy Industries and Samsung Heavy Industries — rebounded on Wednesday.
Stocks of Hanwha Ocean, HD Hyundai Heavy Industries and Samsung Heavy Industries were trading at 104,900 won, 508,000 won and 21,500 won per share, respectively, as of 2 p.m. Wednesday, up 1.75 percent, 2.42 percent and 1.42 percent from the previous day’s closing.
Shortly after the Chinese government’s sanctions announcement for Hanwha Ocean’s US subsidiaries on Tuesday, Seoul’s presidential office said the Korean government is communicating with the Chinese side through a trade channel and responding to minimize damage.
“We are going to have to comprehensively assess whether (the sanctions) will impact the MASGA project at a later time,” said the presidential spokesperson’s office.
“But the affected companies do not have many transactions with Chinese firms, so it looks like there will be limited impacts for now. While it’s difficult to prejudge the possibility of additional sanctions, we will continue to keep a close eye on this.”
hwkan@heraldcorp.com