China shipping stocks up in Hong Kong on freight rate rise hopes
Wednesday, 01 February 2012 | 16:30
Shares of Hong Kong-listed Chinese shipping companies rallied along with Asian rivals on Wednesday amid hopes they will be able to increase freight rates and expectations that Beijing's move to ban a new class of giant freight carriers from the country's ports could benefit Chinese ship operators.
Shares of Orient Overseas (International) Ltd jumped 8.5 percent, the biggest single-day gain in four weeks, after its shipping arm, OOCL, said it would lift freight rates by $200 per container to cover costs for cargo moving from North Europe to Asia from Feb. 15.
"Further rate restorations to be applied during 2012 will be announced in due course," OOCL said in a statement.
The general rate increase was announced after a Tuesday report by industry publication the Journal of Commerce that Maersk Line, the world's biggest container shipping company, was raising its rates on the Asia-Europe lane by $775 from March 1.
Singapore-listed Neptune Orient Lines Ltd also gained 5 percent.
Standard Chartered Bank analyst Claire Teng said the key driver for the stock rally was freight rise hopes.
"Maersk is the largest player in Asia-Europe trade with more than a 20 percent market share so it has pricing power," she said.
China COSCO Holdings Co Ltd , the country's leading shipping conglomrate, and China Shipping Development Co Ltd rose more than 6 percent in Hong Kong after China's trade ministry said had it banned the berthing of Vale's Valemax very large ore carriers and other giant freighters.
China Shipping Container Lines Co Ltd saw its Hong Kong-listed shares jump 15.1 percent to a more than four-month high as expectations of a recovery in freight rates, which are mostly under operational costs, triggered short-covering, traders said.
However, CLSA analyst Philip Chow said customers also had bargaining power over freight rates. It was still a question of whether shipping companies would be able to implement an increase in part or in full, so the stock's rally might not be sustainable, he said.
"They are already trading closer to mid-cycle valuations, but remember these companies are still losing money, so it is very hard for me to imagine that they can stay at 1.0 times book or 0.8 times book forever," he said.
Slowing economic growth in the United States and China and the European debt crisis are expected to affect global trade and demand for shipping, an industry that has already been facing a supply glut, analysts said.
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