China Shipping Container Lines (2866) was a big mover last week, rising 13.3 per cent on Thursday alone. The jump came despite no particularly positive news about the issuer and a downbeat outlook for the shipping sector. For example, MISC - Southeast Asia's largest shipping line by market value - signalled last week its intention to get out of its unprofitable container business.
In the meantime, analysts are trying to make sense of its huge gains last week.
Lawrence Li (UOB Kay Hian) cites the release of a Deutsche Bank report on Wednesday that raised its rating on the Asian container sector to overweight.
Li also notes that CSCL's big gains on Thursday followed news that six central banks had cut the cost of their US dollar funding. Li says it created positive sentiment for the shipper, partly because it had announced plans on Tuesday to spend US$754 million on eight new vessels. Li says the central banks' funding cut encouraged investors, who say CSCL will have access to cheaper financing for this purchase.
'The market believes CSCL will benefit from the monetary easing,' says Li. 'Shipping finance will remain tight. But, sentiment-wise, it's a positive for CSCL.'
Philip Chow (CLSA) attributes CSCL's upswing partly to 'a bit of short covering' but puts it down mainly to investors' reactions to Thursday's news of the central bank rate cuts, which propelled markets globally and pushed Hong Kong equities up 5.63 per cent. Chow says the event sent investors after high-beta stocks (that move in line with the broader market), of which CSCL is one.
