Cosco turns 'sell' target for hedge funds
COSCO Corp had been regarded by many investors as a safe haven to park their nest eggs until the global financial storm blows over. Until this week, that is.
The stock of the shipbuilder and bulk-carrier company has hit choppy waters over the past few days as it came under strong attack from hedge funds.
It has plunged by an eye-popping $1.08 since Monday to close at $3.90 yesterday, wiping off a staggering $2.42 billion in market value.
As one of the best-performing stocks this year, Cosco has become a 'sell' target for index funds that need to rebalance their portfolios as regional markets tumble.
It also came under attack from hedge funds that needed to liquidate their investments in a hurry to meet redemption calls.
The biggest selling pressure on the counter was experienced yesterday, as Cosco's share price went on a roller-coaster ride, and tumbled by 62 cents during the day.
Even though the stock managed to pare losses later to close just 20 cents down, the ride still left a bitter taste in investors' mouths.
This was because until the recent market selldown, analysts had still been putting out glowing reports on the company, whose shipyard unit in China had been winning accolades for securing blockbuster shipbuilding orders.
They had set price targets ranging from $4.60 to a lofty $8.
So it must have come as a rude shock to investors holding the stock that Cosco's share price could fall even below that $4.60 target set by Morgan Stanley analyst Sophie Loh, who was among the least bullish about the stock with her 'equal weight' call.
But some dealers would argue that the recent market volatility gave investors a good opportunity to accumulate Cosco shares on the cheap.
After all, Cosco has an order book of US$3.3 billion (S$5.1 billion), which will give its bottom-line earnings a big boost all the way to 2010.
And as DBS Vickers pointed out in its report on Aug 6, there may still be scope for an earnings upgrade for Cosco as development plans unfold for the company's greenfield projects and mergers and acquisitions.
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