Korea’s shipping stocks survive the bear market amid solid shipping rates

South Korea’s shipping stocks are set to resume gains as they recouped most of their earlier losses on anticipated normalization in China after lockdowns.

Korea’s leading bulk carrier, Pan Ocean, saw its stock price surge 21.47 percent this month as of Tuesday. Compared with the beginning of the year, the price jumped 49.54 percent. The shares closed Tuesday’s trading at 8,090 won ($6.40), heading towards last year’s peak of 8,770 won. Korea’s sea flag container carrier, HMM, also climbed 47 percent from its bottom at 21,900 won in January this year. It has gained 13.56 percent so far in May.

Shipping stocks are surviving the bear market as freight rates remained strong despite foggy logistics outlook.

The Shanghai Containerized Freight Index (SCFI) rose 14.86 points in a week to post 4,162.69 last Friday, rebounding in 18 weeks since Jan. 7. The index is still 21 percent higher than a year ago when it posted 3,432.5. The Baltic Dry Index (BDI), representing dry bulk shipping rate, recorded 3,369 on Monday, up 160 percent from its lowest of 1,296 on Jan. 26.

Market analysts expect that freight rates would stay strong because stable supply chain management has become more important than ever in business.

“Companies wouldn’t try to cut down freight rates from their experience during the pandemic,” said Choi Ko-woon, a researcher at Korea Investment & Securities. “They are revising their supply chain management strategies to cope with freight bottleneck, tough inventory management, and longer shipping routes.”

In the short term, shipping companies are expected to benefit from the lifting of citywide lockdown in Shanghai, the world’s biggest port, in June.

Reflecting such positive changes, securities firms have raised estimates for Korean shipping companies’ earnings. According to FnGuide, HMM’s consensus on annual operating profit rose 22 percent from 8.49 trillion won suggested earlier this year to 10.35 trillion won. Pan Ocean’s estimate also jumped 27 percent from 516 billion won to 709.2 billion won during the same period.

HMM rose 0.93 percent to 32,550 won in the early trading on Wednesday, while Pan Ocean stayed the same at 8,090 won.
Source: Pulse