Sino-Global Shipping America (SINO)

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UPDATE: Shipping stocks run out of steam as 'bubble' concerns trip up bulls

4:38 pm ET November 17, 2016 (MarketWatch)
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By Tomi Kilgore, MarketWatch

Shipper shares are in a sea of red, but a couple stock extend gains

Shares of shipping companies were mired in a sea of red Thursday, as concerns that the recent bubble may be popping triggered a sharp pullback.

Of the Nasdaq exchanges 10 biggest decliners, seven were shipping stocks.

The biggest loser was DryShips Inc.'s stock (DRYS), which plummeted 85%, after running up more than 14-fold over the past week.

The stock was halted for the entire session Wednesday, with Nasdaq seeking information following the surge. Early Thursday, the Greece-based owner of dry bulk carriers said it had entered into a securities purchase agreement with Kalani Investments Ltd. for the sale of convertible preferred securities valued at about $20 million.

Diana Containerships Inc. shares (DCIX)(DCIX) tumbled 69%, after a combined fivefold jump the past two sessions. Volume was 13.3 million shares, compared with a full-day average over the past 30 days of about 830,000 shares, according to FactSet. Globus Maritime Ltd.'s stock plunged 58% on eight-times average volume, after powering up eightfold the past week.

Diana's stock had shot up as much as 59% and Globus shares climbed as much as 37% earlier in the session before turning lower.

"While we believe retail momentum and short covering likely got this trade going, given the sheer size of the volume and the continued (relentless) pricing movements, we believe momentum-based algorithms--quant trading--are likely a very significant factor/catalyst at this point," analyst Michael Webber at Wells Fargo wrote in an emailed note to clients. "We believe this is important to note, given that if these moves were purely a retail momentum trade, the incremental value created could have relatively more staying power than a more quant driven flash (esque) bubble."

(https://sw.graphiq.com/w/l6aFamDTHLv)

Short covering is Wall Street lingo for when a crowd of bears scramble to close out their bets that a stock's price will fall. The most recent exchange data showed that short interest, or bearish bets, had soared to historic heights in recent weeks. Quant, or quantitative trading, refer to computer-based systems that can make very short-term trading decisions based only on relative price movement rather than fundamental or macro news.

Sino-Global Shipping America Ltd.'s stock (SINO) sank 26%, but was up as much as 111% earlier in the session at an 8 1/2-year high. The stock had climbed nearly seven fold in the past week.

Elsewhere, shares of TOP Ships Inc. (TOPS) shed 29%, of Seanergy Maritime Holdings Corp. (SHIP) slumped 46%, of Euroseas Ltd. (ESEA) slid 43%, of Navios Maritime Partners L.P. (NMM) dropped 5.2%, and of Pyxis Tankers Inc. (PXS) fell 23%.

Don't miss: Shipping stocks soar as bears abandon ship (http://www.marketwatch.com/story/shipping-stocks-soar-as-bears-abandon-ship-2016-11-16).

See also: The top 7 Nasdaq gainers are all shares of shipping companies (http://www.marketwatch.com/story/the-top-5-nasdaq-gainers-are-all-shares-of-shipping-companies-2016-11-15).

The selloff wasn't quite unanimous. Global Ship Lease Inc. shares (GSL)(GSL) surged 25%, and have now doubled in three sessions. Volume jumped to 20.2 million shares, nearly 40 times the full-day average.

Shares of Rand Logistics Inc. (RLOG) soared 38% to close at the highest level since Jan. 4, after running up 49% over the past five sessions. Volume spiked to 24.4 million shares, compared with the full-day average of about 121,000 shares.

Wells Fargo's Webber said that while a significant pullback in the sector is likely, he also believes the troubled sector (http://www.marketwatch.com/story/foundering-hanjin-shipping-seeks-debt-relief-2016-05-02) provides an opportunity for longer-term investors (http://www.wsj.com/articles/taiwan-approves-17-6-billion-aid-package-to-troubled-shipping-companies-1479313587) once the market settles down.

"While we believe these pricing movements are still too severe [to] get in front of on the short side (at least for us), we do think there will be a material flip side to his trade," Webber wrote. "Ultimately, we think they'll give a lot of this back...but probably not all of it, as longer-term prospects have likely improved to at least some degree."

-Tomi Kilgore; 415-439-6400; [e-mail]

(END) Dow Jones Newswires

November 17, 2016 16:38 ET (21:38 GMT)

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