The Importance of Self Preservation

In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading

Half Full or Half Empty?

China has almost single handedly supported the whole dry bulk market despite the world economic gloom. While the BDI marches forward largely due to the tight Capesize tonnage supply, it remains anyone’s guess if this frantic pace of iron ore chartering will continue to last. Will China’s USD 585 billion stimulus package whet the country’s appetite for commodities when infrastructure project spending picks up steam? Or is this just pure stockpiling speculation and a bear market rally?

In the meantime, there are increasing concerns that China’s recovery may come at the expense of inflating asset bubbles, increasing economic volatility and burgeoning bad bank loans. Latest figures showed that China’s new lending doubled to RMB 664.5 billion (USD 97 billion) in May from RMB 318.5 billion a year earlier and industrial output rose by 8.9% year on year. Ma Jun, chief China economist with Deutsche Bank AG in Hong Kong described the pace of bank lending as dangerous but there are also those who beg to differ. In a recent report entitled “The World’s Largest Local Banks, The Largest in the World”, analysts at Taifook Securities believe that the concerns over asset quality deterioration appear exaggerated. The securities house says the current infusion of credit actually eases the liquidity crunch for many medium sized private enterprises, thereby providing an opportunity for highly leveraged sectors, notably property, to restructure their balance sheets. Whatever the case may be, we expect regulators to scrutinize new lending more closely to deter speculation. Continue Reading