Cosco Pacific, the Hong Kong arm of China's largest state-owned shipping company, plans to raise $1.55 billion by placing 250 million shares with institutions, the largest red chip share placement in recent months. The shares will be priced at $6.20, a 5.6 per cent discount to Cosco's closing price yesterday of $6.55, with the proceeds used to expand the company's leasing fleet and for working capital. The placement follows similar moves by fellow red chips China Travel International Investment Hong Kong, Guangdong Investment, China Overseas Land & Investment and Guangnan (Holdings). Stock market insiders said the placement was well timed and argued the discount would attract strong support from potential buyers. PrimeEast Securities sales director Allen Chang said: 'I think demand is very good because they are not going to give to broker clients, only to institutions.' Sources said Cosco had considered pricing the shares as high as $6.40, but cut the price as the shares came off during the day. Nikko Securities institutional sales manager Kent Rossiter said the possibility of a rise in US interest rates could have pushed Cosco into taking action. Peter Mallinson, partner in charge of equities at Goldman Sachs (Asia), said: 'This will be a lump sum which makes up 13 per cent of the company's share capital after the offering.' Goldman Sachs (Asia) and BZW (Asia) are helping arrange the sale. Analysts have been invited to attend a presentation of the offering at Cosco's office today. Cosco Pacific, which operates a huge container leasing business through subsidiary Florens Container Co, is controlled by China Ocean Shipping (Group) Company. The company operates and leases about 310,000 teus (20-foot equivalent units), which contributes about 67 per cent of its profit. Ninety-four per cent of the containers are standard dry freight, 4.6 per cent are refrigerated and the remaining are open top and flat rack containers. Cosco, which also operates Container Terminal 8 East jointly with Hong Kong International Terminals at Kwai Chung, and ports in China, planned to purchase more containers, Mr Mallinson said. Beijing-controlled China Ocean Shipping (Group) Co will sell 250 million existing shares to institutional investors and purchase 250 million new shares from Cosco - using the same transaction method as Cheung Kong and Henderson for their offerings. Cosco is establishing a worldwide network to support its plan to move into short-term or master-lease business next year after the expiry of existing long-term leases. Florens Container Corp managing director Luk Chi-wing said that the company saw an opportunity in master leases and wanted to enter that market.