Port Stocks Plunge
A new maritime financial insight report for April has warned of the risk of recession as port stocks posted massive declines amidst the spread of coronavirus (COVID-19).
The Drewry report said that COVID-19 has destablised equity markets. It stated that despite strong industry fundamentals and prime importance in the international trade, port stocks under its coverage posted massive declines with DP World the exception.
In line with the MSCI emerging market index decline of 23.9%, Drewry Port Index lowered 22% on YTD basis.
“Moving forward, we believe that longer the situation prevails and wider the spread into key consumer markets, greater the risk of a deep recession, with recovery in seaborne trade pushed towards 2021-22,” said Drewry.
Container shipping stock prices have been in full retreat. In early March, stock markets around the world sold off and investors struggled to calculate the economic fallout from COVID-19.
“This is a fear event; probably more akin to 2008-09 financial crises,” noted Drewry.
It believes markets will likely remain volatile until there is some combination of 1) evidence of successful virus containment; 2) clarity on the net economic impact; and 3) a concerted global policy response.
“As such, we think the performances of carriers in 2020 will be significantly hit. Carriers are also likely to intensify practices such as void sailings in order to minimise their losses, thus eroding service reliability,” reflected Drewry.
Source: Port Strategy