MARKETS SEVERELY INFECTED BY CORONAVIRUS
Another painful week for maritime investors: The Dow Jones Global Shipping Index dropped by 8.8%, extending its losses from the beginning of the year. The Offshore sector lost more than 12%, caused by the drop in oil prices. By contrast, the Crude sector lost only 1.7% after having reached very low valuations across the board. It seems that at least this particular sector may now have found its bottom. For instance, Teekay Tankers presented very good Q4 results, and the guidance for Q1 was also quite impressive.
Last week, Avance Gas and BW LPG reported their Q4 results which were broadly in line with expectations. Each company announced a 50% dividend payout ratio based on Q4 earnings. This represents more than a 5% dividend yield per quarter. However, the outlook for 2020 seems to be quite uncertain as Avance Gas did not give a clear guidance for Q1 TCEs. This may partly explain why the share prices did not really react to the good earnings announcements.
Our trading strategy generated a slightly positive return w-o-w, supported by overweighting the Crude sector and the put option on the S&P 500. We closed this hedge on Friday and locked in an almost 5% performance contribution from this trade.
Going forward, we expect the volatility to decrease somewhat in the next week. This should allow the stock prices to climb again. The decisive question remains whether long-term investors will return to the maritime stock market in the next weeks.