A surge in dry-bulk shipping stocks this week could be “extra-fundamental” with little connection to how the market is currently performing, a top analyst claims.
The sheer volumes of trades in bulker stocks are, nonetheless, impressive as core US-listed dry-bulk stocks pile on large percentage gains on a daily basis, Urs Dur of Lazard Capital Markets told TradeWinds on Wednesday.
At the time of writing bulker companies held a monopoly over the ‘Best Performers’ list of the TradeWinds Shipping Index with most posting gains of over 20%
So what is driving investors towards dry stocks at a time when rates are still relatively floored and mining giants are slashing iron ore production and announcing wholesale layoffs?
“There are a lot of reasons that this movement doesn’t make sense,” Dur said.
“There’s obviously a fervour. Everyone’s got hot and heavy with these [large listed dry-bulk owners].”
The New York-based analyst contended, however, that the rush to stocks “appears extra-fundamental to dry-bulk shipping”.
He said one of the main reasons behind the gain in stock values and volumes traded could be an announcement from US president elect Barack Obama that he intends to spend a substantial amount on infrastructure during his tenure.
Although Dur conceded such a move is “not a reason to buy stocks” in and of itself as it does not directly impact the dry-bulk owners, it is reasonable to expect some positive kick-back from such mooted investment plans.
“Once you talk about building large-scale infrastructure everyone does well. Even [tractor manufacturer] John Deere in the last few days has seen a heck of a pick up.”
Other possible reasons behind the drive in bulker stocks this week posited by Dur are a “slight improvement in [Baltic Dry Index] levels”, an improvement in volumes of trade being led by the forward freight agreement (FFA) market, and the possibility of investors seeing a correlation between the very recent weakening of the US dollar and a rise in commodity movements.
Whatever the reasons, undeniably volumes of dry-bulk stocks being shifted have been on the up.
“What is most fascinating today is that volumes are intense. These volumes in shipping are unheard of,” Dur contended.
The analyst picked out George Economou’s DryShips as a prime example of the positive swing in bulker stocks this week.
“DryShips is trading more than its float; that is substantial. It’s one of the hottest stocks on the market now,” Dur said, adding that its trading volume is below much larger companies such as Brazilian miner Vale and IT giant Cisco Systems.
And the feverish trading may not be simply a flash in the pan.
“‘Unprecedented volume’: This could be the catchword for 2008 and the start of 2009,” Dur added.
But it is not all roses for the market as, despite being “still optimistic on dry-bulk”, Dur warned the increased volumes and stock-price hikes may represent more of a trading opportunity that a fundamental opportunity.
“There is certainly some [more negative] news on the dry-bulk market right now. Ships are still operating well below cash flow breakeven levels and still face real issues like vessel valuations.”
If only volumes on the water were anywhere near as high as those at the bourse.
No comments:
Post a Comment