Asia Reflation Momentum puts commodities and shipping stocks at the top
Reflation trades are active in Asian stocks, where commodity shippers and producers are outperforming both broader stock indicators and surging commodity prices as economies recover.
Actions of Cosco Shipping Holdings Co. has jumped 75% this year in Shanghai. Philex Mining Corp. gained over 40% in the Philippines, while Vietnam’s largest steel producer, Hoa Phat Group, grew 74%. Shipping was the main industry for benchmarks in Japan and Taiwan.
As the whole world experiences a surge in energy-related stocks, Asia is expected to benefit more as commodities expand their gains. Materials and Energy stocks weigh more than 8% in the MSCI Asia-Pacific Index, compared to around 6% for the S&P 500 Index, according to data compiled by Bloomberg.
âThere is pent-up demand as several major economies – like the United States and some European countries – reopen with successful vaccine deployments,â said Paiboon Nalinthrangkurn, CEO of Tisco Securities Co. in Bangkok. “We are bullish on the actions of exporters, such as electronic parts and commodities, as more countries open up.”
While analysts see more benefits for commodities as the world comes out of the pandemic there is a lot of risk. China’s campaign to lower what it calls unreasonable prices and any cuts in stimulus from the U.S. Federal Reserve could test the asset class and the companies related to it. Industrial metals have has hesitated in recent weeks over fears that rising costs will stoke inflation.
Meanwhile, the region’s maritime stocks are attracting investors as the global economic recovery drives demand for products made in Asia and supply chain constraints drive shipping rates to record highs. that of South Korea exports, a key indicator of world trade, grew at the fastest annual rate since 1988 in May. Taiwan too revised export growth forecast for 2021 to over 20%, down from 9.6% previously.
Thoresen Thai Pcl Agencies and Regional Container Lines Pcl, two of the largest transport stocks in Thailand, has at least tripled this year. This comes as the country’s SET index gained around 12% over the period. In the Philippines, the best-performing stock on the local benchmark is International Container Terminal Services, up 19%, compared to a 5% decline for the national benchmark.
“The dynamics of supply and demand will likely lead to one of the best years for the container industry in 2021 and put it on a solid footing for a profitable 2022,” Bloomberg analysts Lee A Klaskow wrote on Friday. and Adam Roszkowski in a note. “Rates could stay well above breakeven points even if they drop from their current highs.”
– With the help of Ishika Mookerjee, Nguyen Kieu Giang, Ian C Sayson, Moxy Ying and Abhishek Vishnoi