Ship Operators Jump on Higher Dry-Bulk Rates: Hong Kong Mover

By Jasmine Wang - Oct 12, 2012
Bloomberg
China Shipping Development Co. (1138) and China Cosco Holdings Co., the nation’s biggest operators of dry- bulk ships, both rose the most in three weeks in Hong Kong trading because of increasing rates for hauling commodities.
China Shipping advanced 5.5 percent a HK$3.47 at 10:49 a.m., while China Cosco added 6.2 percent to HK$3.60, both headed for the largest gain since Sept. 19. The two stocks each climbed more than 7 percent earlier in the trading session.
Charter rates for capesizes have risen 50 percent from lows in mid-September because of increasing demand and customers having to pay more to persuade shipowners to take vessels out of lay-up, Deutsche Bank AG analysts Joe Liew and Sky Hong wrote in a note yesterday. The industry, which will probably post losses for the third quarter, may also have a better year in 2013 because slower capacity growth will revive rates, they said.
“We are encouraged by the recent pick up in spot dry bulk shipping rates,” Liew and Hong said. Investor interest in the sector is returning “because stocks are so bombed out and rates have started to recover from lows,” they said.
China Shipping, which also has oil tankers, is the bank’s top pick in the industry because it has lagged behind Pacific Basin Shipping Co. over the past month and has a lower price. It trades about 0.4 times the book value of its assets, compared with about 0.7 times for Hong Kong-based Pacific Basin, the analysts said.
China Shipping has tumbled 28 percent this year in Hong Kong. China Cosco (1919), which also operates container ships and terminals, has dropped 5.8 percent. The Hang Seng Index has risen 15 percent.
The Baltic Dry Index (BDIY), a benchmark for global commodity- shipping rates, rose 3.2 percent in London yesterday. It has jumped 37 percent since Sept. 12, when it reached a seven-month low.