Shipping stocks up on relief package announcement

Shipping stocks on the local equity market moved higher on Wednesday following the government's announcement of a NT$60 billion (NT$1.89 billion) relief package a day earlier, intended to help the sector climb out of its current financial difficulties, dealers said.

Despite gains in the share price of shipping companies, investors should not chase the stocks for the moment as the sector still faces a supply glut, which makes it uncertain it can turn a profit, they said.

Shares in Evergreen Marine Corp. (???), the largest container shipper in Taiwan, gained 0.42 percent to close at NT$11.95, and its smaller rival Yang Ming Marine Transport Corp. (??) rose 1.86 percent to end at NT$6.03 on the Taiwan Stock Exchange. The weighted index on the main board closed up 31.19 points, or 0.35 percent, at 8,962.22.

"I think he government came up with this relief package for the local shipping industry because there have been fears Taiwan could see another Hanjin Shipping Co. of South Korea", said Hua Nan Securities analyst Henry Miao, referring to a company that filed for bankruptcy protection in August.

Miao said the global shipping industry has a long term oversupply in capacity problem, resulting in many shippers reporting massive losses, with Hanjin, the largest container shipping firm in South Korea and the seventh largest in the world, forced to file for bankruptcy.

In addition to oversupply, the global trade slowdown has also depressed freight rates, dealing another blow to the industry's bottom line.

"In the wake of the financial aid package, bargain hunters rushed to the trading floor to pick up shipping stocks such as Evergreen Marine and Yang Ming Marine today, betting that the government does not want to see any of them sink," Miao said.

The Ministry of Transportation and Communications (MOTC) announced on Tuesday that it has assigned NT$60 billion in financial aid to the local shipping industry, enabling financially-troubled firms to seek loans with preferential interest rates.

According to the MOTC, any local shipping company to suffer a net loss four quarters in a row is eligible to apply for a low-interest loan. Over the past four quarters, Evergreen Marine has made an accumulated net loss of NT$8.91 billion and Yang Ming Marine NT$16.83 so the two companies can file for financial assistance under the new financial aid package. The interest rate for relief loans will be capped at the post offices' floating one-year deposit rate plus 1.65 percentage points.

The MOTC said the relief package was drafted after detailed discussions with the Ministry of Finance, Ministry of Economic Affairs, Financial Supervisory Commission, the Bankers Association of the Republic of China and the National Association of Chinese Shipowners.

The financial aid package will be submitted to the Cabinet for approval and come into effect shortly, the ministry added.

"The current gains in shipping stocks are simply a technical rebound in response to the news," Miao said. "I do not think investors should chase prices just because of the relief package as few will be sure when these shipping companies will become profitable and start to dole out dividends."

Source: Focus Taiwan News Channel