HSBC Global Research published a report stating that the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX) announced a preliminary six-year agreement on Wednesday (8th local time), pending further approval, which means that the potential strike action originally scheduled for next Wednesday (15th) may be avoided.

The bank noted that shipping companies are trying to push for multiple rounds of General Rate Increases (GRI) and additional fees before the strike, planning to increase the fee by up to $3,000 per 40-foot equivalent unit (FEU) starting next Wednesday. However, with the labor agreement reached, it is believed that the likelihood of implementing the price increase is lower.

In addition, as the freight peak before the Lunar New Year subsides, coupled with seasonal factors, the bank expects that freight rates may face more downward pressure, estimating that shipping companies will have to take tougher suspension measures before the Lunar New Year to control capacity and try to prevent a sharp drop in spot freight rates. With spot freight rates remaining high, the bank expects that shipping companies should maintain considerable profitability in the first half of this year.

The bank reiterated its 'Shareholding' rating on COSCO Shipping Holdings (01919.HK) and OOIL (00316.HK), believing that they will further lower their valuations due to the weakening of spot freight rates and profit momentum. Meanwhile, SITC (01308.HK) is viewed positively, as its yield is expected to remain resilient due to increased dividends.

Stock | Investment Rating | Target Price (HKD)

COSCO Shipping Holdings (01919.HK) | Shareholding | 10.3 yuan.

OOIL (00316.HK) | Shareholding | 95 yuan.

SITC (01308.HK) | Buy | 26 yuan.