Be Selective with Shipping Bets Despite Recovery, Say Experts
Mumbai: Shares of Shipping Corporation of India, Great Eastern Shipping and Essar Shipping surged up to 30% in less than two months even as Baltic Dry Index (BDI), the benchmark for dry bulk shipping freight, jumped 131% in about two-and-a-half months as supply fell due to scrapping of vessels, and demand rose led by the ongoing harvest season in South America.
Shipping companies are hoping to achieve healthier operational numbers if freight rates remain firm. However, analysts said investors should remain selective about which stocks to pick among the pack.
“Investors should not draw major conclusion from surge in BDI because the global trade is struggling for recovery,” said G Chokkalingam, managing director, Equinomics Research & Advisory. “Great Eastern Shipping can be considered as good long-term investment.” WhileBDIhasjumped131%froman all-time low of 290 in February to 671 on Wednesday, punters are betting that the index will touch 900-levels by May-end. During the global financial crisis, BDI had collapsed from an alltime high of 11,793 in May 2008 to 663 by December of that year.
“A sharp rise in the index indicates that demand has picked up and hence, freight rates are going up,” said Sudip Bandyopadhyay, CMD, Inditrade Capital. “There is a huge capacity constraint in the shipping sector. So, any pick-up in demand is bound to fuel freight rates and stock price rally in shipping companies.” Analysts are of the view that though a further rise in BDI is likely, the upside could be limited because there isn’t much trade taking place as Chinese economy is slowing down and not much exports are taking place from the region.