Will Rising Baltic Dry Index Keep Driving Cosco Up?

The Baltic Dry Index (BDI) is a measure of shipping costs for commodities,exceeding 3000 points for the first time since october, buoyed by Chinese demand for iron ore. The index tracking transport costs on international trade routes rose 222 points or 7.6% to 3164 points on 27 May 2009, leading the longest advance in two years.

Does the strong rebound in BDI beyond 3000, in tandem with the worldwide stock market rally, telling us that we have finally passed the worst of the downturn since the credit crisis began in late 2007 ? What are the implication for shipping and shipbuilding stocks like Cosco Singapore ? Shouldn't it be a good news for Shipping stocks?

Last week, Cosco share price gained 9 cents at $1.28 on strong traded volume of 79 million shares. This is in stark contrast to low trading volume and flat trading price pattern for the past few trading days. On the chart, we can see that big white candlestick breaks out of the SMA H(5), signalling it could possibly move higher to around $1.50 level, in line with the rising Straits Times Index (STI), which closed higher at 2329 level last week.

If STI is supported by 2300 level, we may see STI rising to 2500. In such scenario, Cosco share price will also move up higher in a steady uptrend. Afterall, the whole market is flooded with so much liquidity at a near zero U.S. interest rate.

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