Korean shipping, shipbuilding stocks rally ahead of earnings release
Shares of South Korean sea carriers and shipbuilders are flying high on expectations for stellar performance this year ahead of their earnings release for the first quarter.
HMM Co., the country’s largest shipper, saw its shares surge 9.71 percent to 36,150 won ($32.54) on Monday. Its share price more than doubled from 13,950 won at the end of last year. Shares of HMM added 1.8 percent to finish Tuesday at 36,800 won.
The stock rally is attributable to a faster-than-expected recovery in global trade that has caused a supply shortage of sea carriers, resulting in a surge in freight rates. The Shanghai Containerized Freight Index, a barometer of spot freight rates on container transport, jumped 5 percent in the past week, hitting a fresh high of 2979.76 points.
Dry bulk carrier freight rates are also at a 10-year high. The Baltic Dry Index soared 17 percent to the highest level in a decade over the same period.
“Unlike Pan Ocean and SM Korea Line with long-term contracts accounting for 50 percent and 90 percent, respectively, HMM relies more on contracts that promptly reflect spot freight rate,” noted Choi Go-woon, an analyst at Korea Securities & Investment. “Because average rates in the first quarter were estimated to have risen 49 percent on year, HMM is expected to report record high operating profit in the first quarter and better-than-expected profit in the second quarter.”
The country’s four major shipbuilders also saw their shares rally on soaring demand for vessels in line with rising freight rates. Shares of Korea Shipbuilding & Offshore Engineering gained 6.74 percent on Monday. Samsung Heavy Industries added 4.21 percent, Daewoo Shipbuilding & Marine Engineering 6.71 percent, and Hyundai Mipo Dockyard 9.28 percent.
KSOE shares fell 0.33 percent to close Tuesday at 150,000 won and Samsung Heavy Industries down 1.62 percent at 7,300 won. 놈ㄱShares of Daewoo Shipbuilding & Marine Engineering gained 2.26 percent to finish at 31,700 won and Hyundai Mipo 1.23 percent at 73,900 won.
The four shipbuilders bagged combined contracts worth $12.4 billion in the first quarter, more than six times as high as in the comparable period a year ago.