Transport Stocks Rose Too Fast... "Time to Wait for New Momentum"

HMM's Promise ship (Photo by Asia Economy DB)

[Asia Economy Reporter Geum Boryeong] Analysts suggest that transportation stocks, which have seen a rapid surge in prices for a while, now need to wait for new momentum.

According to the Korea Exchange on the 7th, HMM closed at 12,750 KRW on the 4th, down 1.54% (200 KRW) from the previous day. As of 11:25 AM that day, it recorded 12,250 KRW, down 3.92% (500 KRW) compared to the previous trading day.

Transportation stocks had quickly reflected expectations of a turnaround ahead of next year. This was due to rising freight rates and the positive investment sentiment sparked by news of the development of a COVID-19 vaccine.

Choi Go-woon, a researcher at Korea Investment & Securities, explained, "Investment in transportation stocks is busier than ever as we approach the year-end. The Shanghai Containerized Freight Index (SCFI) has been hitting record highs consecutively and is expected to continue rising this month. It took 11 years for the SCFI to rise from 1000 in 2009 to 1500, but it only took a month to reach 2000." The closing price of HMM, which was 6,860 KRW on September 25, rose by 85.86% until the 4th. Recently, Korea Line's stock price surged sharply in the past month, doubling from 1,590 KRW on October 30 to 3,180 KRW on the 4th.

However, Choi believes it is difficult to expect new positive factors in the near term. He said, "Even if the SCFI rises further from here, it is difficult for shipping companies' fourth-quarter profits to increase proportionally because there are fixed-volume contracts with fixed freight rates. Therefore, this is a time to adjust the pace."

Looking ahead, significant fundamental improvements are expected next year in land, sea, and air transportation. Following container shipping, the aviation industry has entered a restructuring phase led by the Korea Development Bank. Government policy support is expected to rebuild the key industries of shipping and aviation. Additionally, government intervention is likely to reduce the burden of oversupply, which was difficult to resolve through market logic alone. Choi said, "We expect March to be a turning point for aviation and shipping," adding, "After Korean Air's capital increase is completed and container shipping companies sign new annual fixed contracts for North American routes, new momentum is expected to emerge."