SHARE PRICES DURING COVID-19 PANDEMIA

There are various listed terminal operating companies, some with an international portfolio (such as ICTSI and Hutchison Port Holdings), others with one or various terminal operations in a specific country, such as HHLA (Hamburg, Germany), Luka Koper (Koper Slovenia), Santos Brazil (various ports in Brazil) and Westports (Port Klang, Malaysia).

A first noteworthy conclusion from the stock price evolution of these companies is that overall, they generally have performed worse than the overall stock market (comparing to the national indices).

This intuitively makes sense, after all, trade is (and is likely to remain) more adversely impacted than the economy as a whole. For instance, for many tech firms, the effects on demand are not as large as for ports, in some cases, demand of technology firms has even grown.

Second, seaports seem to have fared better than airports. That may indicate that investors think the long-term effects on air travel will be larger than on maritime transport.

To my mind, this also makes sense as the virus risks may make people wary of travel for some time to come, while our current experience with working from home may lead to a lasting reduction of business travel.

Third, the one segment that performs well during this crisis, like the 2008 financial crisis, is oil tank terminals. The listed companies Vopak and Sinopec both have fared better than the indexes in their respective home countries and better than container terminal operators.

Finally, there are huge differences between specific terminal operators. There does not seem to be a ‘COVID-19 impact logic’ to explain these (or at least I do not see it).

HHLA and Santos Brazil has performed relatively bad, while Westports has performed remarkably strong, even (marginally) better than the overall Malaysian stock market. The global operator ICTSI has performed worse than HPH.

Upfront, two potential explanations could be proposed: 1) Terminals in countries where the lock-down has been (or is expected to be) more severe will see the shares decline most; 2) Shares of companies with relatively more transhipment volumes decline more as this segment is most vulnerable.

However, HHLA has a more limited transhipment share than Westports, and I would think ICTSI has a more limited transhipment share than HPH. And the effects of the lockdown in Germany seem similar to those of Malaysia.

A word of caution for those who interpret this as a motive to buy shares of port companies now that they are low: over the last decade, shares of port companies have underperformed compared to the overall stock market.