ON THE BACK of better news flow, the Straits Times Index firmed up to end last week 37.1 points or 1.3% higher. The Euro woes aren’t over yet and will continue to dampen sentiment, as they did today with markets dipping slightly. But bull markets are meant to climb a wall of worry, says Andrew Beal, director of Pacific equities at Henderson Global Investors. And while some economic indicators point to slowing growth, this should be expected given the strong recovery last year, he adds.

In fact, tracing the arc of the economic recovery shows improvements in late cycle sectors like ship-building and air travel. In a report this morning, DBS Vickers highlighted that new orders for bulk carriers in May hit a high of 7.8 million tonnes, up from 7.1 million tonnes in April. This is the highest in monthly orders since the financial crisis first hit hard in September 2008, say DBS analysts Ho Pei Hwa and Janice Chua.

 

“In spite of huge order backlog, new orders for bulk carriers unexpectedly gained momentum over the past few months. We believe the momentum is sustainable on the back of [the] global [economic] recovery, stronger Asia demand, lower newbuild prices and firm BDI above [the] 2,500 level,” DBS says. The BDI, or Baltic Dry Index, tracks shipping prices of various dry bulk cargoes like coal, ore and grain. DBS likes Cosco Corp (Singapore) for its shipbuilding recovery and offshore contract catalysts, and Yangzijiang Shipbuilding Holdings for its proven management execution.

 

Meanwhile, a Financial Times report last week quoted shipping companies like Denmark’s Maersk Line and Hong Kong’s OOCL as saying that container shipping demand is rebounding so much faster than expected that they could soon face a container shortage. Locally-listed container shipping companies includes Neptune Orient Lines, STX Pan Ocean and Samudera Shipping Line. Cosco, Yangzijiang and NOL were among the top 20 most heavily traded stocks by volume last week.

 

Also trading briskly were shares of GMG Global, a rubber planter with operations from the Ivory Coast to Indonesia. In its Friday morning note, Kim Eng pointed out that this “hot stock” is well-positioned to benefit from robust auto sales in China, projected to grow at 15% every year for the next decade. The latest edition of The Edge Singapore also has a story on this rubber play.

 

Asia Food & Properties (AFP) has announced an agreement to sell one of its subsidiary companies, Florentina International Holdings (FIH), to Golden Agri-Resources for RMB976 million ($198 million). FIH makes instant noodles and ice sticks in China. AFP says it wants to sell FIH to focus on its property business. It will use the net proceeds of about $199.6 million “to increase its land bank when opportunities arise”.