HONG KONG (XFN-ASIA) - Goldman Sachs downgraded China COSCO Holdings to "sell" from "neutral", citing expected oversupply in freight capacity in the coming years and weaker earnings expectations for 2009 and 2010.
It cut its target price on China Cosco to 16.0 hkd from 21.0.
The brokerage also downgraded another bulk shipper Pacific Basin Shipping to "neutral" from "buy" and cut the target to 11.60 hkd from 16.0.
"We maintain our cautious 12-month view of bulkers and deepen our negative stance as we roll over valuations from end-2008 to 2009 and reduce our 12-m target prices by 12 pct on average," Goldman said.
The sector's orders are strong, but concerns arise as bulk shipping capacity is expected to rise significantly by 2011, posting significant downside risk to freight ratest, it said.
"We expect the BDI (Baltic Dry Index) to decline 40 pct year-on-year in 2009 and a further 47 pct in 2010," it said.
China COSCO shares ended the morning down 0.94 hkd or 4.82 pct at 18.56 while Pacific Basin was down 0.40 hkd or 3.5 pct at 11.04.
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