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Transportation stocks helped by plunge in crude oil prices

Transportation stocks helped by plunge in crude oil prices

Taipei, July 7 (CNA) The local transportation sector got a boost Tuesday morning from an 8 percent plunge in international crude oil prices overnight amid concerns over Greece's debt problems, dealers said. Transportation stocks staged a strong rebound as bargain hunters turned active on hopes that air fares and shipping rates will rise in the third quarter when global travel and trade are at their peaks while fuel costs fall, they said. As of 11:24 a.m., the transportation sub-index had risen 1.82 percent to 82.40. The weighted index on the Taiwan Stock Exchange was down 0.06 percent at 9,250.62 after starting strong. In the shipping segment, Evergreen Marine Corp. (???) had added 3.88 percent to NT$17.40 (US$0.56) and Yang Ming Marine Transport Corp. (??) had risen 4.76 percent to NT$12.10. Among airline companies, EVA Airways (???) had gained 4.39 percent to NT$22.60, and China Airlines (CAL, ??) had added 2.47 percent to NT$14.50. "The fall in international crude oil prices is no doubt positive for the transportation sector as falling fuel costs will help them cut operating costs and strengthen their bottom lines," Hua Nan Securities analyst Henry Miao said. International crude oil prices plummeted about 8 percent overnight to a three-month low amid worries over what would come next for debt-ridden Greece after voters rejected conditions set by creditors in a referendum on Sunday. The referendum has led to concerns that Greece could exit the eurozone, dampening investor confidence in Europe's economic fundamentals, dealers said. "Whenever uncertainty over the world's economic recovery arises, crude oil prices trend lower," Miao said. "After crude prices fell as much as 8 percent overnight, many investors expect the transportation sector to be the beneficiary," Miao said. According to Miao, fuel accounts for about 40 percent of the operating costs of CAL and EVA Air and 20-30 percent of the operating costs of Evergreen Marine and Yang Ming Marine. "If Iran and global powers led by the United States reach a consensus on a nuclear deal by the deadline (of July 7), Iran could be allowed to release more crude oil into the market, which would add more downward pressure on crude oil prices," Miao said. "The current buying reflected hopes that crude prices will continue to fall, giving another boost to the domestic transportation sector in terms of profitability," Miao said. Analysts said there have been signs that cargo delivery rates have been on the rebound as the world enters the peak trade season, and air fares are moving higher because of strong demand during the current summer vacation. "I expect these transportation stocks to challenge their recent highs on a series of positive leads," Miao said. The analyst said Evergreen Marine and Yang Ming Marine could trend as high as NT$20 and NT$13, respectively, while CAL and EVA Air are unlikely to see technical resistance unless the two stocks move closer to NT$16 and NT$24, respectively. (By Frances Huang)


Updated : 2021-09-26 06:27 GMT+08:00