The bonds of WFS and CMA CGM, and US-China relations

All,

In the past, volumes in both air freight and container shipping have been driven by the cycle of restocking and changing views around the US-China trade relationship. The 1H 18 restocking ahead of the US tariff hikes gave way to lower volumes in 2H 18/2019 as the US-China relationship deteriorated. Periods when the relationship was generally expected to become less hostile, such as mid-late 2018 and late 2019-early 2020, attracted buyers to the bonds of WFS and CMA CGM, including many from China. The other way around for most of 2019.

Is this happening again? The victory of US president-elect Joe Biden has provided additional support to the bonds of WFS and CMA CGM. Some investors expect the US-China trade relationship to improve as a result, a view not universally shared. Mr. Biden indicated today during a NYT interview that he would prioritize coordination with US allies to build a coherent China strategy, and not immediately reduce tariffs. We could see these bonds move early in 2021 as talk is translated into action.

Feel free to reach out if you would like to exchange ideas on the names. 

Juliano