Stock falls add to investor worries over export outlook
Shipping companies see sharp decline in freight rates in traditional lull after the Lunar New Year
Shares of some export-oriented companies fell as much as 13 per cent this year despite the mainland's export growth having jumped more than 10 per cent last month, underpinning investor worries over the sector's outlook.
VTech, which makes electronic learning products, and Techtronic Industries, which produces power tools and outdoor power equipment, saw their shares fall 10.63 per cent and 13.45 per cent, respectively, in the year so far. Container port operator China Merchants Holdings (International) is down 4.77 per cent.
The slide in market value flies in the face of robust growth in mainland exports last month, which rose 10.6 per cent from a year earlier and 4.3 per cent from December. However, the growth rate could have been inflated because of over-invoicing, a Citigroup report said.
Analysts said some exporters were over-invoicing their shipments in order to bring capital into the country in contravention of Beijing's capital controls.
The Shanghai Containerised Freight Index, which tracks weekly freight rates for cargo exiting Shanghai, fell 12 per cent last week.
Manufacturing activity in the first two weeks following the Lunar New Year is traditionally slow as many factories have yet to return to full operation because workers have not returned from their hometowns.
The drop in the freight index this year is steeper than last year, as it fell 8 per cent in each of the two weeks.
The decline was due to sluggish demand from Europe as well as higher freight rates before the new year break, one shipping executive said.
"Demand from Europe dropped abruptly after Lunar New Year following an unprecedented rush over the past two months," said Huang Xiaowen, the managing director of China Shipping Container Lines.
About 15 per cent of the company's fleet on the Asia-Europe route was idled because the load factor fell below 60 per cent, barely covering operating costs, Huang said.
He also said higher freight rates this year skewed the comparison. Liners raised rates on the route to US$1,600 per 20-foot box before the Lunar New Year. A year ago, they stood at US$1,200.
"There are still uncertainties in the market and we hope that demand on the Europe trade lanes will rebound by next month or early April," Huang said.
Freight rates to the United States West Coast dropped 3 per cent last week, which was on par with the drop in the same period last year.
"Shipowners were apprehensive about the market and slashed prices too prematurely," said Geoffrey Cheng, the head of transport at Bocom International. "It will be a challenging year for the shipping industry as the delivery of mega vessels will push up the capacity by 6 to 7 per cent while the demand would only grow 5 per cent."
