(Bloomberg) — Asia’s hottest trade this year isn’t all about chips. Shipping stocks are sailing ahead as geopolitical tensions drive up freight rates, boosting earnings outlook for container liners.
A Goldman Sachs gauge of Asia shipping has climbed about 17% this quarter, while an index of semiconductor stocks fell 18% during the period. The rally in shipping stocks is offering investors an opportunity outside Asia’s crowded artificial-intelligence trade. The Middle East war has tightened vessel supply and analysts expect more gains for the sector ahead.
The demand is “quite good” this year and earnings have been much better than expected, said Joakim Hannisdahl, chief executive officer at Gersemi Asset Management AS. “You’re in a strong seasonal period for a year.”
The gains come as ships navigate disruptions in the Red Sea and the Strait of Hormuz due to the Iran conflict, while a rush to get ahead of US tariffs also drove demand and pushed up freight rates. The Shanghai Containerized Freight Index is trading at its highest level since July 2024 after rising for eight straight weeks.
The stocks leading the gains in Asia include TS Lines, SITC International Holdings and Mitsui OSK Lines.
Along with Middle East disruptions, typhoons in Asia stand to increase port congestion, decrease effective capacity and keep pricing elevated, according to Bloomberg Intelligence. These effects could be exacerbated by the shipping rush before China’s Oct. 1-7 Golden Week holiday, BI said.
Jefferies has raised its earnings forecasts and price targets for Japanese shipping companies Nippon Yusen KK, Kawasaki Kisen Kaisha and Mitsui. The containership markets “remain firmer than expected” from the Red Sea disruption, congestion and resilient demand, it said.
To be sure, the biggest risk to the outlook is a diplomatic breakthrough with Iran. US President Donald Trump said his officials had “very good” talks with Iranian envoys in New York. A deal could restore shipping through the key waterway and ease vessel shortages and war-risk insurance costs.
For now, persistent disruptions and elevated freight rates are keeping the earnings backdrop favorable for Asian shippers.
“Container prices seems to correlate well with the increase in shipping names recently,” said Simon Sidmalm, a portfolio manager at Tundra Fonder AB. “Geopolitical tension around key straits leads to longer shipping routes, combined with higher fuel prices.”
–With assistance from Weilun Soon.
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