Greek Debt Deal a Boon for Asian Shipping Stocks: Analyst
Wednesday, 22 February 2012 | 00:00
The approval of a second bailout for Greece on Tuesday will bode well for Asian shipping companies, according to one analyst, who points out that Asian container shippers have a large amount of business with Europe.
“About 30 percent of container shipping revenue and about 30 percent of revenue for Chinese ports is directly attributable to Europe. So any sort of solution or signs that they are getting closer to a long-term solution in Europe is certainly good for those names." Jonathan Windham, Director & Head of Regional Industrials, Asia Ex-Japan Research at Barclays Capital told CNBC on Tuesday.
Windham says container shipping companies, ports and shipyards have "rallied massively," since October, when investors were extremely bearish on Europe and the global economy. But he says the stocks are still relatively cheap.
"In October, investors were falling over themselves on who could be more negative on how this thing would work out in Europe, and really what's happened is Europe hasn't fallen into the Atlantic into the end of the year," Windham said. "You've got the stocks rallying significantly. Most of them are still trading quite cheaply relative to long term averages."
Last week the Baltic Dry Index, which tracks shipping rates for dry commodities such as iron ore, and coal took a big hit, falling to a nearly three-year low — down almost 50 percent this year. Windham says investors should steer clear of the dry bulk space, which is suffering from overcapacity, and focus on container shipping instead.
"You've had a number of the companies including Maersk and OOIL [Orient Overseas International] here in Hong Kong announce price increases over the last couple of weeks. So in the container space you're going from very difficult fourth quarter 2011 operating conditions and actually think you see quarterly earnings improve for at least in the next three quarters," he said.
Since shipping stocks are volatile and investing in them involves taking on macro-economic risks, Windham recommends picking up companies that have lower debt levels.
He's overweight on Hong Kong listed China Shipping Container Lines, Orient Overseas International, COSCO Pacific, China Merchants and Hutchison Port Holding Trust.
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