We have earlier advocated that “ the normalisation process will lead to great opportunities even with incremental gains in the underlying markets as discount to Net Asset Values narrow.

With the market bottoming out, we place our bets on the dry bulk names with high operating leverage and considerable exposure to the spot market. We expect the uptrend in freight rates to mirror in asset prices, which in turn, will have an amplified effect on stock prices. For existing players and asset markets, valuations have very little downside in our view. Bankruptcy risk which was being priced across stocks has significantly eased as key players raised equity and continue to restructure debt and balance sheets.

We expect freight markets to recover gradually in the remaining months of the year as Chinese stimulus flows through the industrial economy, providing opportunities to add exposure to dry bulk on correction as we believe the worst is behind us.”

Apart from the normalisation trade, one key pillar of our thesis was the investor under ownership. We were rightly positioned since early summer on capturing the delta in stock prices as normalisation took hold. We see the left out feeling to be evident and expect investors to start giving a relook to the sector and dig deeper into the fundamentals and available opportunities.

Price Performance