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A lesson for China tanker investors

Chinese retail investors have boosted the share prices of sanction-affected Cosco Shipping Energy Transportation. But these mom and pop investors may pay the price for their impetuous investment in the same way that many other much wealthier non-shipping players have experienced in the past

CSET’s share price has been surprisingly resilient after the US sanctions on one of its major subsidiaries were imposed on September 25

INVESTORS dealing with Cosco Shipping’s tanker business appear braver than the charterers who have cut the ties with its vessels.

Cosco Shipping Energy Transportation, one of whose subsidiaries is blacklisted by the US for being involved in shipping Iranian oils, is struggling to find employment for a large part of its ocean-going tankers. Its liquid natural gas carrier fleet, worth more than $4bn, is also affected with its prospects in the dark.

But the company’s share price has been surprisingly resilient.

Having gone through the initial slumps after the US sanctions were announced three weeks ago, its stock value has regained quite a lot of the ground lost. CSET’s Shanghai-listed shares closed at Yuan6.71 ($0.95) per unit on Wednesday, compared with the nadir at Yuan6.05 a week ago.

On Monday, the price even surged to Yuan7.87, the highest level seen since early 2016.

The rebound is likely to have surprised many institutional investors, who had built a long position in CSET on the expectation of a sizzling tanker season in the fourth quarter but ended up deciding to dump the shares following the sanction news. Some Chinese investment fund analysts were said to have lost their jobs.

One China-based equity analyst who covers the CSET stock said the price was perked up by small-holding individual retail investors as news that the very large crude carrier rate topping $300,000 per day had even hit the headlines on mass media.

These retail investors in China will have little knowledge about the complexity of shipping and sanctions. They are likely to have viewed CSET as being like any other tanker companies that are set to reap a fortune from the recent market boom, the analyst added.

What they should know is that there has never been a lack of investors and speculators outside of shipping — not least the US private equity funds — that hope to strike it rich through this industry. Many of them lose their shirts.

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