I’ve been interested in the Hong Kong-listed port operators for a long time. Ten or fifteen years ago, it was a truism that world trade had a direct, and high-beta, relationship with world GDP growth and that port operators in China were direct beneficiaries. Yes, there are substantial differences from one name to another within the group, but if economies are expanding, they were the clear place to be.
Today, the situation a lot more nuanced. Beijing clearly understands that its future is not in low-end export-oriented manufacturing. The complete collapse of the global trade finance system in late 2008 made customers, particularly in the United States, realize that their supply chains were too extended (dysfunction in the operation of the California ports helped this thought process along, as well). The result has been a reorientation toward suppliers closer to home.
This move has, in a sense, reversed the causality in port stock watching. It used to be that rising GDP meant the Chinese port stocks would go up. Now, I think, the right line of reasoning is that if the Chinese port stocks are going up, then there must be significantly rising economic activity somewhere (China and the EU would be the default guesses)–whether we can see it clearly or not.
Anyway, the Chinese port stocks are just breaking out of the trading they’ve been in for that past half-year. They’ve only been acting better for a few days. But if the move continues, this could be an indicator that 2015 will be a better year for world commerce than the consensus now thinks.