J.P. Morgan: Reiterates "Overweight" rating on COSCO SHIPPING Energy Transportation (01138), recommends buying on dips.

J.P. Morgan released a research report reiterating its "Overweight" rating on COSCO SHIPPING Energy Transportation (01138), with a target price of HK$29, recommending investors buy on dips. It noted that VLCC freight rates softened for most of last week, which it believes was due to the extreme logistics bottlenecks in September beginning to ease. By last Thursday (the 1st), freight rates rebounded, reflecting strengthening underlying cargo demand rather than merely a recurrence of port congestion. The bank pointed out that it currently sees three positive signals, including: the earlier freight rate pullback reflecting improved logistics; the reopening of Saudi Arabia's Yanbu port; ship-to-ship transfers shifting away from congested Oman; and more Indian refiners sailing directly into the Strait of Hormuz, releasing some capacity. On Thursday, freight rates on the West Africa-to-China, US Gulf-to-China, Oman-to-China, and Hormuz routes rebounded, reflecting that the newly released capacity was quickly absorbed. J.P. Morgan expects that tanker attack incidents will keep a risk premium on Hormuz freight rates, and that rate strength will also extend from VLCCs to Suezmax and Aframax tankers.