HSBC sees rising tide for container shipping as sector poised for strong H2

SITC International Holdings

26/07/2021 09:22

** HSBC sees the global container shipping sector as poised
for a strong second half of the year, though it warns of
fast-rising risks ahead 
    ** The broker points out the recent uptick in spot freight
rates (SCFI) - largely driven by congestion at the Chinese port
of Yantian  urn:newsml:reuters.com:*:nL3N2NT0OQ - and a "flurry of consensus earnings
upgrades" on positive profit alerts
    ** It however also notes recent share price
underperformance, attributing it to the newest regulatory
headwinds such as the sector's inclusion in the European Green
Deal or U.S. President Biden's executive order targeting
anti-competitive practices  urn:newsml:reuters.com:*:nL2N2OL0QQ 
    ** As it anticipates freight rates of the companies it
covers to climb by 41% this year, the brokerage raises its
2021-22 sector forecasts for EBITDA by up to 15% and net profit
by up to 23%
    ** It says however that while the momentum for the next 12
months remains strong, it's likely to slack by the end of 2022
once congestion eases, demand normalises and new vessel orders
continue
   ** HSBC starts coverage of Orient Overseas (International)
Limited  0316.HK  with "buy", citing its high yield estimates  
   ** It downgrades Hapag-Lloyd  HLAG.DE  and Evergreen Marine
 2603.TW  to "hold" on limited upside potential, maintains
Maersk's  MAERSKb.CO  and SITC's  1308.HK  "buy" ratings
   ** "While a rising tide can lift all boats, the difference in
valuations has started to emerge," it says

 (Reporting by David Latona)
 ((David.latona@thomsonreuters.com))