NOL

Shipping / NOL: Maersk announced substantial capacity cuts of 13-14% on its Asia-North Europe and Asia-Med trade networks last week, reducing industry capacity by 2.8-3.5%. This is a major positive step by the industry leader, and should encourage other carriers to do likewise. The action may help falling rates find a floor, although caution that cuts of another four loops will be needed to ensure the success of the planned 1 November AE rate hikes. CIMB note that although container freight rates are likely to continue drifting lower until early Nov, think container shipping stock prices may react optimistically in the short term on the expectation that other carriers could follow Maersk’s lead in cutting more capacity and restoring the demand-supply balance. House conclude that high-beta CSCL typically tends to be the best performer in such an environment, though not raising Neutral rating as there are supplyside risks to rates in 2013, and retain preference for the stronger names like OOIL and SITC.