Goldman Downgrades Bulk Shippers!

My last posting on the Baltic Dry Sector was on June 17th 2008: The Collapse of the Baltic Dry Index

On the Financial Edge, it reports that Goldman Sachs is downgrading Asia Bulkers:
28-07-2008: Goldman downgrades MBC and other Asia bulkers

• HONG KONG: Goldman Sachs downgraded shares in China Cosco, the country's largest shipping firm, to a sell rating from neutral on Monday, citing an oversupply of freight capacity in coming years and weaker expectations for 2009 and 2010.
  
  Shares in China Cosco lost 1.7% after the report, underperforming a 0.6% gain on the index for Chinese shares listed in Hong Kong.
  
  The US investment bank, which also downgraded STX Pan Ocean, Malaysian Bulk Carriers (MBC) and U-Ming Marine on Monday to sell from neutral, said freight rates will decline with the global Capesize fleet set to double by 2011.
  
  "We advise investors to sell bulker stocks now, well ahead of the correction in the freight market and decline in earnings that we anticipate from 2009 onwards," the bank said in a research report on Monday.
  
  Goldman cut Pacific Basin to neutral from buy and sent the stock down 2.8%.
  
  Strong demand for energy and raw materials mainly from China have sent freight rates to record highs in the past two years and fuelled strong orders for new ships.
  
  The sector's order book stands at a record and the Capesize fleet, large bulk cargo ships that mostly carry iron ore and coal, is set to double by 2011, which implies very significant downside risk to the freight market, Goldman said.
  
  "We expect the BDI (Baltic Dry Index) to decline 40% year on year in 2009 and a further 47% in 2010," it added.
  
  But there are bright spots among listed Asian bulkers.
  
  Goldman upgraded China Shipping Development's yuan denominated A shares to buy from neutral as it is more defensive with 60% of its revenue from domestic shipping.
  
  It also upgraded Precious Shipping to buy from neutral because of its more attractive valuation relative to peers and on expectation of greater forward fleet coverage.
  
  China Shipping edged up 0.83% in Hong Kong at 0316 GMT and Precious Shipping also rose 1.6%. -- Reuters

Here is the Reuters report: Goldman downgrades COSCO, Asia bulkers

• HONG KONG, July 28 (Reuters) - Goldman Sachs downgraded shares in China COSCO (1919.HK: Quote, Profile, Research), the country's largest shipping firm, to a sell rating from neutral on Monday, citing an oversupply of freight capacity in coming years and weaker expectations for 2009 and 2010.
  
  Shares in China COSCO lost 1.7 percent after the report, underperforming a 0.6 percent gain on the index for Chinese shares listed in Hong Kong .HSCE.
  
  The U.S. investment bank, which also downgraded STX Pan Ocean (028670.KS: Quote, Profile, Research) Malysian Bulk Carriers (MBCB.KL: Quote, Profile, Research) and U-Ming Marine (2606.TW: Quote, Profile, Research) on Monday to sell from neutral, said freight rates will decline with the global Capesize fleet set to double by 2011.
  
  "We advise investors to sell bulker stocks now, well ahead of the correction in the freight market and decline in earnings that we anticipate from 2009 onwards," the bank said in a research report on Monday.
  
  Goldman cut Pacific Basin (2343.HK: Quote, Profile, Research) to neutral from buy and sent the stock down 2.8 percent.
  
  Strong demand for energy and raw materials mainly from China have sent freight rates to record highs in the past two years and fuelled strong orders for new ships.
  
  The sector's order book stands at a record and the Capesize fleet, large bulk cargo ships that mostly carry iron ore and coal, is set to double by 2011, which implies very significant downside risk to the freight market, Goldman said.
  
  "We expect the BDI (Baltic Dry Index) to decline 40 percent year on year in 2009 and a further 47 percent in 2010," it added.
  
  But there are bright spots among listed Asian bulkers.
  
  Goldman upgraded China Shipping Development's (600026.SS: Quote, Profile, Research) (1138.HK: Quote, Profile, Research) yuan denominated A shares to buy from neutral as it is more defensive with 60 percent of its revenue from domestic shipping.
  
  It also upgraded Precious Shipping PSL.BK to buy from neutral because of its more attractive valuation relative to peers and on expectation of greater forward fleet coverage.
  
  China Shipping edged up 0.83 percent in Hong Kong at 0316 GMT and Precious Shipping also rose 1.6 percent. (Reporting by Parvathy Ullatil and Alison Leung; editing by Jonathan Hopfner)