Shipping’s trading liquidity has soared this year, pointing the way to a potential new strategy for investors.
Investment bank Clarksons Platou Securities cited Refinitiv data for the 42 shipowners it covers as showing a “significant” improvement in trading through 2022.
In the five days ending 10 June, the average daily share turnover was $1.1bn, the third week in a row with such high liquidity.
Israeli container line Zim saw stock worth $500m change hands in New York, analysts Frode Morkedal and Even Kolsgaard said.
Boxship owners, in general, have averaged $437m in daily turnover this year, up 152% from the average for 2021.
Dry bulk equity trading has been $151m per day, a 104% increase from last year.
And the figure for vessel leasing companies is $120m, up 60%, while crude tanker companies have averaged $67m so far in 2022, a jump of 52% as freight rates improve.
The analysts said that, with increased liquidity, a long/short trading strategy based on the stock price to net asset value (NAV) ratio could become much more viable.
“There is a wide variety of pricing that could be expected to converge over time. Going long [on] low-priced stocks versus NAV and shorting higher-priced stocks ... was a successful strategy in the past when liquidity was as good as today,” they added.
In the LNG carrier sector, stock worth $38m has been traded each day, double that in 2021.
Car carriers trading booms
Product tanker companies’ liquidity is 64% higher year on year at $36m. LPG owners have seen an average of $13m trade, up just 8% from 2021.
The car carrier sector has been a success story so far this year, with rates at record levels.
Trades worth $4.6m have been carried out each day on average.
This is a smaller figure because there are fewer such listed companies, but the rise is a whopping 188% year on year.
Stock markets fell 5% last week, according to the S&P 500 index, with year-to-date losses of 18% close to constituting a bear market.
Shipping equities were unable to escape this, dropping 6% on the week, but remain up 31% so far in 2022.
Container lines fell 12%, while dry bulk equities lost 11% on average.
Demand destruction is a big concern for investors, according to Clarksons Platou.
Inflation is rampant
“Capacity utilisation in the economy is extremely tight, as evidenced by rampant inflation, and the culprit is a lack of cargo supply to meet strong demand,” Morkedal and Kolsgaard added.
“Either more volumes enter the market or price increases cause demand to fall to match supply.”
But low newbuilding orderbooks are lessening recession risks for shipping, Clarksons Platou believes.
And China remains a source of optimism for the industry, as infrastructure-related growth could accelerate in the coming year.