POSCO, Hyundai Heavy Hit Records on Stake Tie-Ups

Shares in POSCO and Hyundai Heavy Industries surged to records on Friday after a unit of the shipbuilder bought another stake in the steel maker, highlighting greater ties between two firms facing stellar earnings.

Hyundai Samho Heavy Industries, a unit of the world's biggest shipbuilder, said on Thursday it had bought 436,000 shares in POSCO for a total of 245.9 billion won (US$264.3 million), increasing its stake in the steel maker to 1.5%.

POSCO and Hyundai Heavy Industries had announced in April they would do a swap deal in which they bought around 350 billion won worth of shares in each other.

The steel maker has been swapping stakes with firms outside of South Korea such as Nippon Steel as it seeks to build alliances that can help it fend off a hostile takeover.

The increased shareholding could help anchor POSCO's management strategy, while supporting its plans to adopt friendly shareholder measures such as share buybacks that would ultimately benefit the firms with which it swaps stakes, analysts said.

Hyundai Heavy Industries could also benefit as it depends on steel makers for the plates used to build vessels.

Both firms are among the KOSPI's top-performing blue chips this year, having rallied to record highs.

Hyundai Heavy shares surged to a record 435,000 won, and were trading 5% higher in the after session, compared with a flat wider market, bringing its gains this year to some 245%.

The shipbuilder said on Wednesday the amount of orders received in August more than doubled from a year earlier.

POSCO surged to a record 686,000 won and its shares were last up 1.6% at 681,000 won. Shares have gained around 120% so far in 2007 amid expectations for strong earnings in the sector on the back of rising steel prices.