Chinese Shipping Stocks Rally on Weak Crude Prices, PBoC Rate Cut
2022.08.22 09:49
By Ambar Warrick
Investing.com– Major Chinese shipping stocks rallied on Monday, benefiting from a drop in crude oil prices and an interest rate cut by the People’s Bank of China.
Shares of COSCO Shipping Energy Transportation (SS:600026) were the best performers on China’s benchmark indexes, rallying over 10% after the firm gained approval for a 5 billion yuan ($730 million) note issuance.
Cosco’s peers, including China Merchants Energy Shipping Co Ltd (SS:601872), CSSC Offshore & Marine Engineering Group Co Ltd (SS:600685), and COSCO Shipping Specialized Carriers Co Ltd (SS:600428) rose between 6% and 10%, and were also among the top performers on the benchmark Shanghai Shenzhen CSI 300 index.
Gains in the sector were driven by a sharp fall in oil prices, as energy markets priced in a potential supply glut from the lifting of U.S. sanctions against Iranian crude exports. Weaker oil prices point to a lower fuel bill for shipping firms.
Also boosting shipping stocks was a drop in the Chinese yuan, to a near two-year low. Weakness in the yuan increases the value of the foreign exchange accumulated by major shipping firms, benefiting their share price.
The yuan sank to near two-year lows after the People’s Bank of China cut interest rates for a second consecutive week, as it moves to shore up economic growth amid Beijing’s strict zero-COVID policy.
The move was broadly positive for Chinese stocks, given that it frees up more liquidity that can be potentially invested into stocks. The CSI 300 index jumped over 0.5%.
Chinese shipping stocks have largely outperformed the broader market this year, given that they are less impacted by lockdowns in the mainland. Strength in China’s exports also indicates a strong base for shipping stocks.
