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Transportation stocks up as crude prices fall to over 5-year low

Transportation stocks up as crude prices fall to over 5-year low

Taipei, Dec. 31 (CNA) The transportation sector extended its gains on Taiwan's stock market Wednesday morning after international crude oil prices fell to their lowest level in more than five years overnight, dealers said. Strong institutional buying in transportation heavyweights on Tuesday on expectations that lower fuel prices would increase their profits encouraged retail investors to follow suit on Wednesday, helping the sector buck the broader market's doldrums, they said. As of 11:18 a.m., the transportation sub-index had risen 1.28 percent to 90.70 on the Taiwan Stock Exchange, while the broader market's weighted index had lost 0.04 percent to 9,265.16. Among the transportation heavyweights, Evergreen Marine Corp. had gained 1.81 percent to NT$22.45 (US$0.71), and Yang Ming Transport Corp. had added 0.90 percent to NT$16.90. China Airlines (CAL) had gained 3.21 percent to NT$14.45, and EVA Airways had risen 2.09 percent to NT$22.00. "Investors simply seized on another plunge in international crude oil prices to continue to pick up these transportation stocks soon after the local bourse opened," MasterLink Securities analyst Tom Tang said. "Hopes that the sector's profitability will improve have been raised." With international crude oil prices tumbling for a second consecutive day, the prices of West Texas Intermediate in the U.S. and Brent crude in Europe fell 1.7 percent and 2 percent, respectively, at one point overnight to their lowest levels in five and half years. The downtrend resulted from a forecast made by the American Petroleum Institute that U.S. crude oil inventories could rise about 800,000 barrels to 387.3 million barrels. The higher inventories sparked fears of a further fall in crude oil prices, which have already plunged 40 percent in the second half of this year. According to Yuanta Investment Consulting, fuel costs account for 40-45 percent of airlines' operating costs and 20 percent of shippers' operating costs. The advisory firm said that for every 1 percent fall in crude oil prices, the profits of EVA Air, CAL, Evergreen Marine and Yang Ming Marine will rise 1.2 percent, 1.7 percent, 1.6 percent and 1.3 percent, respectively. "The continued fall in international crude oil prices is very positive for these airlines and shipping companies. It was no surprise that these transportation stocks continued to outperform the broader market," Tang said. On Tuesday, shares of EVA Air, CAL, Evergreen Marine and Yang Ming Transport rose 1.17 percent, 1.45 percent, 1.61 percent and 3.40 percent, respectively, on the main board. "Their gains largely came from strong buying from institutional investors, in particular from Taiwan-based investment trust companies," Tang said. "At a time when foreign institutional investors hold a large chunk of electronics stocks, local institutional investors have targeted old economy stocks, in particular in the transportation sector." According to the TWSE, institutional investors bought a net 7.50 million EVA Air shares, a net 3.50 million CAL shares, and a net 3.44 million Evergreen Marine shares on Tuesday, while selling a net 2 million Yang Ming Marine shares. "I expect that local transport sector will continue to move higher as long as international crude oil prices remain low," Tang said. (By Frances Huang)


Updated : 2021-07-24 15:24 GMT+08:00