Reflation trades are alive and kicking in Asian equities, where shippers and raw materials producers are outperforming both broader stock gauges and the surge in commodities prices as economies recover.
Shares of Cosco Shipping Holdings Co. jumped 76% this year in Shanghai. Philex Mining Corp. has gained more than 40% in the Philippines, while Vietnam’s biggest steel producer, Hoa Phat Group, advanced 72%. Marine transportation was the top industry for benchmark indexes in Japan and Taiwan.
While the whole world is experiencing a surge in energy-related shares, Asia stands to benefit more as commodities extend gains. Materials and energy stocks carry a weightage of more than 8% in the MSCI Asia Pacific Index, versus about 6% for the S&P 500 gauge, data compiled by Bloomberg show.
“There is a pent-up demand as several major economies—such as the U.S. and some European countries—reopen with successful vaccine roll-outs,” said Paiboon Nalinthrangkurn, the chief executive officer of Tisco Securities Co. in Bangkok. “We are upbeat on the shares of exporters, such as electronic parts and commodity products, as more countries open up.”
Although analysts see more upside for commodities as the world emerges from the pandemic, there are plenty of risks. China’s campaign to bring down what it calls unreasonable prices and any tapering of stimulus by the U.S. Federal Reserve could test the asset class and companies linked to it. Industrial metals have wavered in recent weeks on concerns that higher costs are stoking inflation.
Meanwhile, the region’s shipping stocks are attracting investors as the global economic rebound spurs demand for products made in Asia and supply chain stresses send shipping rates to record highs. South Korea’s exports, a key proxy for world trade, surged at the fastest annual pace since 1988 in May. Taiwan also revised 2021 export growth forecast to more than 20% from an earlier 9.6%.
Thoresen Thai Agencies Pcl and Regional Container Lines Pcl, two of biggest transport stocks in Thailand—have at least tripled this year. That comes as the country’s SET Index gained about 12% during the period. In the Philippines, the best-performing stock on the local benchmark is International Container Terminal Services, up 20%, versus a 5% drop for the nation’s benchmark.
Some marine transportation stocks extended this year’s advance on Tuesday. Korea Line Corp. and Taiwan’s Evergreen Marine Corp. each rose more than 3%, while Japan’s Kawasaki Kisen Kaisha Ltd. gained 4.5%, set for its highest close since March 2015.
“Supply-demand dynamics will likely result in one of the best years for the containerliner industry in 2021 and put it on strong footing for a profitable 2022,” Bloomberg analysts Lee A Klaskow and Adam Roszkowski wrote in a note on Friday. “Rates could remain well above break-even levels even if they come off their current highs.”
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