Understanding China


#461

Wah Kwong looking to be a middleman to Chinese equity, whilst Trump builds walls China builds bridges - from Tradewinds

Wah Kwong scouts China for equity partners

Industry veteran David Palmer says his new company is shying away from shipyards for the time being but looking to invest with strategically interesting management clients

June 21st, 2018 17:00 GMT

by Bob Rust

Published in Dry cargo

Wah Kwong Maritime Transport is looking to use its shipmanagement business strategically as a springboard to making equity ­investments, says chief executive David Palmer.

“We are not expanding in third-party management to compete with the likes of V.Ships,” says Palmer, who joined the conservative, family-owned shipowner a month ago.

Rather, the Hong Kong time charter-oriented owner is looking for clients that need both shipmanagement expertise and commercial connections from a company that moves easily between the Chinese and international business and shipping cultures.

Palmer, who had been Singapore chief executive of Pareto Securities, is settling into his new role.

Wah Kwong had gone without a top executive from outside the Chao family since the 2016 departure of Tim Huxley. In the interim, it has been led by chairman Sabrina Chao, recently with the increasing support of one of her younger brothers, executive director Hing Chao.

Palmer took on his new job after 12 years running the Singapore offshore and shipping finance base that he set up for Pareto in 2006.

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The veteran of Stolt-­Nielsen’s US operations is well travelled in both the shipowning and ship finance world. He moved from the US to Singapore in 2002, where he headed the IMC Pan Asia Alliance for Tsao family-­owned International Maritime Carriers (IMC) ­before his switch to investment banking.

At Pareto, his biggest deals included raising money and acquiring ships for the United Arab Chemical Carriers start-up in partnership with Credit Suisse. More recently, he was involved in the sale of Jaya Holdings’ offshore fleet to Mermaid Marine Australia in 2014 and last year’s sell-off of the 32-ship Swissco ­offshore fleet, now going through the courts.

Wah Kwong headhunted him back from investment banking into shipowning, rather than connecting with him through any transaction business with Pareto, Palmer says.

“I think I ticked a lot of boxes for them,” he says. “I had managed family companies and knew how to work with families.”

Separ­ately, in an interview for Wah Kwong’s in-house magazine, he says: “Wah Kwong was innately appreciative of my grey hairs… and provides a well-rounded final leg to my 40-plus-year ­career in shipping.”

As a traditional tonnage supplier, Wah Kwong has long worked through strategic partnerships with co-investors, and using shipmanagement to explore investment opportunities is a strategy that precedes Palmer’s recruitment. But it will be stepped up on his watch.

Palmer mentions existing client Shandong Landbridge as an example of the kind of client that holds promise for future equity investments. “Landbridge is someone we want to grow with,” he says.

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Wah Kwong chairman Sabrina Chao Photo: TradeWinds Events

So far Wah Kwong does only technical management and newbuilding super­vision for the privately owned company, which has three VLCCs on the water and three more on ­order.

Palmer also points to the growing directly owned fleets of some Chinese ­financial ­institutions, many of which have gone beyond bareboat charter finance leases to doing time charter business ­directly for cargo owners — something that aligns well with the business model of traditional Hong Kong tonnage suppliers.

He sees Wah Kwong as better qualified to develop such business than its Hong Kong peers, because it is the one that has remained most Chinese both in its crewing and its shoreside personnel.

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Wah Kwong is “a Chinese owner based in Hong Kong with an international outlook”, as Palmer sees it, and he believes a competitive ­advantage lies in this distinction.

“Around 91% of our crew are ­Chinese,” he tells TradeWinds. “Some of the other Chinese owners of Hong Kong have ­become less Chinese over the years. We have good communications ­between the office and the ships because everyone is speaking the same language.”

He tells the company’s in-house magazine: “[It] is Wah Kwong’s ability to think like Chinese owners and operators which allows us to serve as a bridge between China and the world.”

Wah Kwong lists a fleet of 15 bulkers from handysize to capesize, plus four aframax tankers and two VLCCs, but Palmer says the dry-wet split is about 50-50 in terms of vessel values. The com­pany is “relatively asset-agnostic”, but new equity investments, whether through partners or at shipyards, are likely to follow that pattern.

“That’s been our company policy to date. We see diversity as a hedge,” he explains.

“I think we are going to be ­targeting commodity bulk trades where there is liquidity in the ­secondhand market, so I don’t think you will see us going into any ­specialised tonnage segments.”

Seamless return

As for gas shipping, where Wah Kwong was active as an owner ­until recently, he says its position as manager of two VLGCs for Fortune Gas and five smaller ships for long-term partner Exmar provides a platform for a seamless return to equity investments there if a suitable opportunity arises.

But it is putting off direct renewals through newbuilding contracts until clarity emerges about how the industry will tackle the emissions question.

“Everybody is consumed with the S-word right now — scrubbers,” Palmer says. “It’s hard even to get a quote. It’s lost to me why we are supposed to be putting ­refineries on ships.”"

Meanwhile, the Great and Ancient is still expanding in China…


#462

You still lose in an inflationary environment as the $100 you invest won’t wont buy $100 in goods at the end of the term (including interest).

A sell off of UST would cause yields to rise, making it more expensive for the US to service it’s debt. This would have a whole series of consequences, most of them negative, especially to those who depend on government services the most. In order to stabilize yields the US would monetize debt, thus creating an inflationary (real, not CPI) environment where the reduced purchasing power of your dollar would negate any real gains you would see investing in UST at the attractive yield.

Russia liquidated half of its holdings last week ($48 billion). While a very small amount there was an effect on yields.


#463

Hows the Dollar versus the Renmimbi?


#464

What Would Happen if China Started Selling Off Its Treasury Portfolio? - Article from Council of Foreign Relations.


#465

It’s a good article and supports my idea about debt monetizing as that’s exactly how the author is suggesting we counter aggressive UST liquidation.

As you read it it is important to note that the authors are analyzing the impact of the potential UST liquidation on the Treasury Market and not the budgetary ramifications that said actions have (although they allude to it when they talk about a “painful” 30 to 60 basis point rise in the ten year). It also fails to mention what the resultant devaluation of the Dollar (lost purchasing power) means to the average family trying to get by. After 8 years of monetary easing has it gotten easier to “get by”?


#466

One thing not mentioned in the article. Should China or any other country decide to attempt to unload enough bonds to make a difference the USA would likely invoke the 1977 International Emergency Economic Powers Act, which gives the US president all the legal authority he would need to freeze foreign owned treasury securities held by US custodians.
China and other countries have better ways in their own countries to screw with US corporations to put pressure on trade disputes. The only thing for certain is if trade wars come to fruition the US consumer will suffer first and most. US corporations willingly and with enthusiasm moved their manufacturing overseas. There is no way they are going to see their record profits plummet by moving back to the USA at this point. They and the Wall St financiers that facilitate this money machine will have their employees in the executive branch and congress correct this situation.


#467

the USA stops funding Chinese businesses to the tune of $300 billion a year and the USA consumer is worse off?
I guess the T bills filled that gap in?


#468

This would be considered a technical default (at least that’s how the market would see it) but if it got that far out of hand I’m sure we would have bigger problems. I would imagine the US would first sanction certain accounts and lock them out of the financial system to prevent and liquidation in the first place.

If a shooting war starts none of it would matter anyways.


#469

It is already happening…, the successful companies inside the wall have global operations they can switch to!

Meanwhile states like Iowa will suffer…

https://www.hellenicshippingnews.com/us-china-trade-war-offers-brazil-opportunity-to-boost-soybean-exports/

And China gains another port for one belt one road…


#470

Harley had already started their Thai factory before all this, why…
Big taxes on imported bikes all over Asia


#471

Buying a Harley is a lifestyle choice. 99% are recreational machines. (I live near one of the UK’s largest dealers) It is a success where branding and heritage sell the product. The trade war Trump has instigated will harm the USA irrevocably if it continues, with China being the chief beneficiary.


#472

The current $300 billion a year trade imbalance with China cannot continue. Something must be one to achieve a near balance.

American cannot offshore manufacturing its basic needs, and expect to remain an independent democracy with a good standard of living.


#473

China have been called out and they dont like it…
Dictators are used to getting their own way


#474

Trump has a simplistic view of the world that simply doesn’t work in the 21st. century. That is both his strength (It is a populist view widely held hence his ratings) and his weakness (it doesn’t work in todays world).

He would be better looking at FDR’s New deal and investing in the USA’s creaking infrastructure to make it more competitive and easier to do business with.

BTW the D in FDR is Delano, one branch of the family had a Steamship operation on the Yangtze till they were run off the river, so FDR knew what China was about from his father in law.


#475

I dont think he has a simplistic view, he understood very well where the USA would be today 25 years ago due to the gov policies.
Plenty of Interviews in those days show that.
He is just trying to reverse that situation he hoped wouldnt come.
Like T Boone Pickens, didnt want to see the USA bankrupt in his lifetime due to poor management.


#476

Yet his policies will do nothing but make the problem worse.


#477

So far, his policies are working a lot better than most people expected. Not that I agree with them all. It’s impossible to predict. Only time will tell.


#478

The rest of the world has not had time to properly respond yet. Things can get interesting when the EU starts to target red states.


#479

foxcon opening a factory in the USA,
USA selling oil and gas to china and others?
Harley Davidson opening factories in countries that have taxes to hinder imports ( this was prior to the new ones)
North Korea at the negotiating table
who’d a thought?


#480

What will China’s response be if we put a Marine contingent on Taiwan to guard our embassy… Oops…I meant our “American Institute in Taiwan”?