Singapore’s “Flyer” Of The Week: Neptune Orient Lines

logo_nolWhat a crazy few weeks it’s been for Singapore shares. Describing the market as “volatile” just doesn’t do the word justice.

After climbing to a high of 3,454 points on 22 May, the Straits Times Index (SGX: ^STI) beat a hasty retreat and dragged both large and small caps down with it. But it seems that some semblance of normality has returned. It just goes to show you can’t afford to be out of the market, ever.

This week, the benchmark index is up around 3% but that pales in comparison to our Singapore “Flyer” share, Neptune Orient Lines (SGX: N03), which has gained 6.7% at the time of writing.

Amusingly, it was only last week I mooted that the fortunes for South-East Asia’s largest container-shipping company could improve when economic conditions in the West pick up. Little, did I know, that it would happen at the blink of an eye.

Shares in the company rallied on reports that freight charges have risen, which means that shipping companies can charge more for every tonne of goods they carry. Over the last few years, shipping companies have suffered from a double-whammy that was brought about by lack of demand and an oversupply of ships. In the case of Neptune, this translated into three consecutive years of losses.

However, things may be looking up for shipping companies. Danish container-ship operator, Maersk, recently said it plans to manage overcapacity by forming an alliance with its shipping rivals.  Elsewhere, Japan said a lower yen had helped to boost exports. Japan has embarked on an ambitious strategy, dubbed Abe-nomics, to revive its flagging economy, which has resulted in the yen losing ground against other currencies.

There is still some way to go before shipping companies can comfortably put the past behind them. That said, the stock market, being forward-looking, probably believe that the economic cycle is gradually turning for the better. That could bode well for cyclical shares, such as Neptune Orient Lines.

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