Investors showing interest to believe in shipping recovery
New index and certificate developed by Lugano-based International Family Office are taking advantage of the reprise occurring in some segments of the maritime sector
Lugano (Switzerland) – The shipping sector seems to be recovering, with its trend aiming at a greater balance between supply and demand of vessels, and an overcapacity gap destined to reduce progressively due to a greater demand of raw materials, to the economic recovery in some developed and emerging areas and to the consequent development of trade, as well as to the restructuring and merger plans already carried out or in progress, also encouraged by the matter related to Hanjin.
Also Chinese export recovery and the favourable Japanese situation have a very positive effect.
The positive trend concern the dry cargo and containers sectors, while for energy transportation it will take longer, although flows between United States and China are increasing significantly.
However, many investors are showing interest in shipping for various reasons.
First of all, in many equity sectors stock-exchange prices are too high compared to the company's turnover and profits. On the other hand, bond yields for quality issuers are low, thus encouraging the search for alternatives.
Despite the proliferation of new financial instruments, there are no products with this kind of underlying assets, and the Baltic Dry Index (BDI) itself, followed also by fund managers and analysts within the financial sector as it is a significant early indicator, did not have an instrument representing it such as one of the numerous ETF.
An asset management company based in Lugano, International Family Office (IFO), filled that gap by creating a Managed Certificate on Shipping Companies issued in Switzerland by one the main national leading banks, which is also one of the major worldwide, denominated in U.S. Dollars.
“Considering the strong connection between BDI and the listing of the major shipping groups, the standard portfolio we have created currently includes 29 companies chosen among the 53 ones within the sector, which are all specialised in the dry industry” IFO's General Manager Angelo Brambilla explained.
“These companies are included in the GICS Industry, with a market capitalisation of at least 300 million dollar, an average daily trading volume of at least 900,000 dollar to ensure liquidity, and a history of at least 10 years of financial statements. We created our new sector index, IFO Marine Index, available on our website and on Bloomberg, representing the management benchmark through the aforesaid certificate”.
IFO's shipping expert Nicola Presa pointed out that “in a financial scenario often dominated by speculation, the Baltic Dry Index and the other data related to maritime transport are an exception, as those who book a vessel really need to transport goods and is not aiming at short-term financial profits, maybe even through obscure instruments and at a high leverage. Therefore, investing in this sector can be a good diversification strategy, especially now that there are less players on the market, demolitions increased – also in advance in comparison with the vessel's service life – new vessels are technically and economically more efficient and shipping companies join forces through mergers and acquisitions”.
Presa observed that “the IFO Marine index is equal weighted as it is periodically rebalanced (at least once a year) to avoid any possible overweight caused by stock fluctuation, thus by possible excessive concentrations. For what concerns the managed portfolio, securities may be sold by increasing the cash portion, according to an internal quantitative model providing trading signals for each security”.
The portfolio ensures a good geographical and monetary diversification, including companies from Hong Kong, United States, South Korea, Denmark, Japan, Taiwan, Norway, Ireland, United Kingdom, Germany and Switzerland.
“As for every new index ad instrument – Presa added – we carried out a back-test in terms of performance. Since the beginning of 2017 capital gains and currency components record +26.15% and +36% for the last 12 months. This is due both to the positive trend of stock-exchanges and to the improvement of these companies' basic conditions”.
The companies currently included in the portfolio are Clarkson PLC, Cosco Shipping Holdings, Cosco Shipping Development, Costamare Inc, Cosco Shipping Energy, D/S Norden, DFDS A/S, Golden Ocean Group Ltd, Evergreen Marine Corp Ltd, Hyundai Merchant Marine, Hapag-Lloyd AG, Kirby Corp, Irish Continental Group PLC, Korea Line Corp, Kawasaki Kisen Kaisha Ltd, AP Moller-Maersk A/S, Kuehne+Nagel Intl AG, Orient Overseas Intl Ltd, Matson Inc, Pacific Basin Shipping Ltd, Mitsui Osk Lines Ltd, Scorpio Bulkers Inc, Pan Ocean Co Ltd, SITC International Holding, Sinotrans Shipping Ltd, U-Ming Marine Transport Corp, Star Bulk Carriers Corp, Wallenius Wilhelmsen Logisti and Nippon Yusen KK.
“It is not by chance that this initiative started in Lugano – Brambilla went on – since Switzerland and Ticino boast a long tradition and a significant number of operators within shipping and commodity trading sectors. This could be the first of many such initiatives to get finance and investments closer to real economy, towards global scenarios in rapid development and with great potential. Think, for example, about infrastructure projects related to ports and logistics for the Far East, Africa, Middle East or Gulf, as well as about the opportunities provided by the new Arctic routes. This seems to us particularly appropriate, as well as appreciated by customers looking for new investment themes”.