South Korea’s containership inventories, which surged in the wake of the Covid-19 pandemic, are declining amid fears of a sluggish economy, which has dropped nearly 80% from its peak and lower freight rates.

Shares of HMM Co., South Korea’s largest container shipping company, closed at 19,950 won ($16) on Monday, down 61% from its May 2021 peak of 51,100 won. HMM’s share price has risen 16x since the pandemic, but so far has been sluggish.

Shares of exchange-traded funds (ETFs) tracking the transportation index of the Korea Stock Exchange (KRX) remain low. The KODEX Transportation ETF is down 38% from its July 2021 peak. HMM accounts for 18.4% of the KRX Transportation Index, second only to Korean Air’s 23.6%.

Since January last year, HMM’s net worth of 133.5 billion has been sold to foreign investors and 49.7 billion to institutional investors. Most notably, the pension fund sold 36.4 billion won of HMM shares.

Shipping stocks lost momentum as freight rates crashed.

The Shanghai Containerized Freight Index (SCFI), which tracks spot rates for Shanghai’s export container shipping market, fell 4.2% last week. The index has fallen for 26 consecutive weeks last year, down 79% from its peak earlier in the year.

`Spot prices have fallen to the break-even point,” said Jeong Young-soon, an analyst at NH Investment & Securities.

Meanwhile, HMM is expected to see revenue and operating profit fall 23% and 47%, respectively, in the first quarter to March, according to financial data tracker FnGuide, which is based on a consensus of three or more investment firms. HMM’s second quarter operating profit is also expected to decline 56% year-over-year.

Analysts have also stressed that HMM could report an operating loss if the economy continues to falter in the first half of this year.

Analysts noted that HMM stock is still undervalued. HMM’s price-to-book ratio (PBR) is 0.4x over the past year, significantly lower than 1.2x in 2021 and 2.7x in 2020, according to Samsung Securities.

Meanwhile, as China reopens its economy, the share of bulk carriers carrying goods is likely to rise.

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