In International Shipping News 18/11/2016
Most shipping stocks pulled back from their eye-popping rally on Thursday after Dryships Inc announced that it raised capital through a share sale and other companies reported results that missed expectations.
Shipping stocks had risen dramatically in recent days, including a roughly 1,500 percent jump for Dryships, as investors reacted to shipping rate increases and the prospect that U.S. President-elect Donald Trump’s policies could further boost demand for shipping of commodities.
But many of the stocks reversed course on Thursday after Dryships announced the share sale giving it proceeds of $20 million initially and Diana Containerships Inc and sister firm Diana Shipping Inc reported earnings that missed expectations.
Investors who were worried about stock dilution at Dryships also fled other companies on bets they would follow Dryships’ lead with their own stock offerings, said a sell-side shipping expert, who asked not to be named.
“I suspect it’s people coming to their senses,” said Stifel Financial Corp director Benjamin Nolan, who covers maritime sectors. “These kinds of extreme rallies that aren’t entirely linked to fundamentals don’t tend to be permanent.”
While analysts said Trump’s expected stimulus spending on U.S. infrastructure should lift shipping demand, they had warned in recent days that the extent of the rally was not backed up by fundamentals in the sector and was likely partly due to momentum-based computer trading.
“Given the sheer size of the volume and the continued (relentless) pricing movements – we believe momentum based algorithms (quant trading) are likely a very significant factor/catalyst at this point,” said Wells Fargo analyst Michael Webber in a note to clients.
Dryships shares resumed trading on Thursday and were last down 80 percent. The stock did not trade in the regular session on Wednesday after a premarket halt when Nasdaq asked for more information. It had risen from $4.56 on Nov. 8 to close at $73 on Nov. 15 after hitting an intraday high of $102.
Globus Maritime shares were down 56 percent Thursday after rising 742 percent in the previous five sessions. Diana Containerships was down 60 percent after rising 433.6 percent in the previous two sessions.
Global Ship Lease stood out in a sea of red on Thursday with a share price increase of 26 percent to $2.52. That stock has risen more than 106 percent since Nov. 10.
Some traders on Wednesday had questioned the sharp rally while one research firm said the move could not be explained just by short sellers covering their positions. Others suggested that U.S. regulators should examine the sector’s trades for any signs of illegal activity.
Dennis Dick, head of markets structure, proprietary trader at Bright Trading LLC in Las Vegas said that he missed out on some gains as he bought a couple of the shipping stocks and sold quickly for 20 to 30 percent gains.
“You see one stock starting to take off in the sector you automatically go and scoop up the other ones because if you are real early the risk is relatively low. Then they start going,” he said. “These things typically do end badly, but once a buzz starts, that is how this stuff gets going, it’s all off the buzz.”
Source: Reuters (Reporting by Sinead Carew, Caroline Valetkevitch and Chuck Mikolajczak in New York, Jonathan Saul in London; Editing by Andrew Hay and Chizu Nomiyama)
