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04.10.2021 kl 16:49 6871

Investors start reaping the returns in extreme container market
For both Maersk and Hapag-Lloyd, the share price has decreased after a week of notable declines among Asian competitors. Analysts estimate to ShippingWatch that investors will start buying again. After a year of record-high freight rates, Jefferies eyes a "turning point."


Photo: Brendan Mcdermid/Reuters/Ritzau Scanpix
BY DANIEL LOGAN
Published: 04.10.21 at 15:44
After a surge that has lasted more than a year, listed container lines are looking on from the sidelines as their share prices cool down.

In the past couple of days, share prices of Maersk and Hapag-Lloyd have declined while Asian competitors have seen their share prices fall by upwards of 10 percent Monday.

This downtrend trend among Asian shipping shares is now rubbing off on Maersk and Hapag-Lloyd, says analyst Mikkel Emil Jensen from Danish bank Sydbank to ShippingWatch.

These companies had broadly speaking seen their stock increase significantly in value, and now there's some cashing in.

MIKKEL EMIL JENSEN, ANALYST, SYDBANK
Principally, this is due to a number of uncertainties pertaining to China. Jensen points to the closedown of factories, triggered by power outages, as well as the debt crisis related to the major Chinese property developer Evergrande as prominent factors, which have now led investors to harvest some of the fruits of the market upturn.

"We've seen Asian carriers plummet in the past week. These companies had broadly speaking seen their stock increase significantly in value, and now there's some cashing in. It's this correction among Asian shipping shares that is spilling over to Maersk, among others," says Jensen while adding that there is nothing company-specific at Maersk that has caused the share to decline.

Jefferies: Faced with "a turning point"
Analyst firm Jefferies also points to power cuts having caused factory shutdowns as one of the biggest reasons why the container market now appears to be faced with a "turning point" after considerable rate hikes since last year.

"We believe that the freight rates are close to a turning point due to pressure from energy shortages in China affecting factory output as well as container rates peaking now that the delivery window for the Christmas holidays is closing, driving up surcharges for guaranteed capacity on vessels," writes Jefferies.



At Sydbank, Jensen considers it likely that the share prices will turn and start climbing again – depending on what happens in China.

"The share performance is very much dependent on the news flow from China in coming weeks, but with the prospect of continued strong commodity demand for the rest of 2021 and continued high freight rates some time into 2022, investors could be tempted to once again buy into carriers," the analyst says.

Looks overdone
Tan Jua Hoo, a former chief analyst at Alphaliner and self-employed consultant today, also expects that investors will pounce on the container lines' shares once again.

"At this point, the selling seems overdone, but it depends on how quickly the market demand can recover so that rates could stabilise and regain some upward momentum," says Tan Jua Hoo in a comment to ShippingWatch.

We believe that the freight rates are close to a turning point.

JEFFERIES
Since late summer 2020, container carriers have seen their earnings trend one way: upwards. Huge demand on the Asia-US and Asia-Northern Europe routes have triggered capacity shortages and sky-high freight rates, providing carriers with record earnings and leaving their customers, the shippers, with frowns on their faces.

In addition, this has led container carriers' share prices to soar. By mid-2021, Yang Ming and Evergreen topped the list of carriers with the largest returns of 2,732 percent and 1,716 percent over the past 12 months, respectively, according to a Sydbank analysis.

English Edit: Christoffer Østergaard

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