CIMB Research downgraded the regional container shipping sector to neutral from trading buy after a transPacific rate hike expected on May 1 did not happen and spot rates began to fall.
CIMB lowered its rating on Neptune Orient Lines, Orient Overseas (International) and SITC International Holdings to neutral.
Last week, NOL and SITC shares lost more than 12% each, while Orient stock fell 16%.
“Investor confidence in container shipping crumbled for the first time last week, after 4-5 months of upward momentum. This triggered the brutal wave of selling,” CIMB said.
Although carriers are still pushing for more rate increases, customers are beginning to resist and capacity is returning in a weak demand environment, CIMB said. “As a result, share prices could retain a downward bias in the next two months.”
But share prices are expected to rebound eventually as second-half earnings are seen to be positive, CIMB said, adding that it does not expect a return to the deep losses in 2011.