One swallow does not a summer make. And one week of share price gains at Yangzijiang Shipbuilding (SGX: BS6) does not diminish the fact that fewer ships are being built right now because of the slowdown in demand for transporting of goods by sea.
Things might change for the better when global economies recover. But for now, cash-strapped consumers in the West are buying fewer goods from the East. Meanwhile, China does not need as much iron and copper as before.
The upshot is that if you are a shipbuilder, you are likely to see fewer orders. That appears to be the case at Yangzijiang, which reported a 10% drop in sales last year after seven unbroken years of revenue increases. Profits fell 15%. The trailing twelve months numbers don’t look too appetising either. Revenues are down 5%, while profits are about 7% lower.
But Yangzijiang, which jumped 7.5% to S$0.935 managed to drum up some good news ahead of results next month. The shipbuilder will become the first Singapore-listed company to trade in Chinese yuan. Trading in yuan as well as Singapore dollars under Singapore Exchange’s dual-currency scheme will start on 5 August. Where Yangzijiang goes, other Chinese companies may follow.
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