For longer-term investment, shipping stocks offered good returns to begin with, but the situation changed in the second half of last year.

Rising shipping capacity caused shipping stocks to sink and enter a slow stage, after seeing significant TSR growth in this sector in previous years.

THAI celebrates its inaugural flight between Bangkok and Moscow in Russia's capital late last year. The national carrier's stock is expected to pick up this year as it has a better marketing plan, including route expansion.

Three leading shippers -- Thoresen Thai Plc (TTA), Precious Shipping Plc (PSL) and Regional Container Line Plc (RCL) -- offered high long-term returns for three to five years, but only RCL did better than the sector average last year.

RCL, capitalised at 18.07 billion baht,generated a 1.9% one-year TSR, 82.1% over three years and 65.3% for five years.

TTA, capitalised at 16.4 billion baht, posted a one-year TSR of -20.8%, three years at 103.5% and 123.4% for five years. PSL, capitalised at 16.5 billion baht, had a one-year TSR of -14.3%, three years at 158.8% and 100.3% over five years.

Renu Bhandasukdi, an analyst at Ayudhya Securities Plc, said the prices of shipping stocks peaked in mid-2005 and now were on a downward trend due to the imbalance of supply and demand. Shipping companies increased their capacity during 2003 and 2004, resulting in signs of oversupply since late last year.

Several brokers see the oversupply remaining for both container and bulk carriers this year which will pressure freight rates, leading to reduced revenue and net profit for shipping companies.

The analyst projected that this year, the average freight rate of bulk carriers would range from US$9,000 to $11,000 per day per ship, down about one-third from the average rate last year.

Scrapping of old vessels, especially small handy-type bulk vessels more than 27 years old that accounted for 36% of global fleet, could cause a rate increase.

Kenneth Chiu, RCL's chief financial officer, said container trade growth was 11.4% in 2005 and the company expected another 10-12% growth this year, based on a 4.3-4.8% world GDP growth forecast by the International Monetary Fund.

He said the challenge these days was capacity growth, with projections that fleets below 2,000 twenty-foot equivalent units (TEU) would grow by 9.4%, while fleets with larger capacity would grow by 19.1% this year. Fleet capacity has outgrown demand since 2005, especially in longer-haul services, for which a lot of new vessels with 8,000 to 10,000 TEU are due for delivery this year.

Mr Chiu said demand and supply were close in intra-Asia trade, so there should be no rate pressure, particularly for smaller ports in Asia where services from mainline operators were unavailable.

He said bunker costs had risen by more than 30%, while interest rates were also on the rise, pushing up costs overall.

``Imagine freight rates are under pressure while expenses are on the rise. It's no wonder that the bottom line was hurt,'' Mr Chiu said, explaining the selling pressure that had been seen in shipping stocks since the second half of 2005.

Mr Chiu said there had been attempts to stabilise freight rates following a rapid decrease in Asia-Europe rates.

``If players can stick together to defend the rate, the chance of success will be much higher than in the past, because today the top five carriers control more than 44% of world tonnage, while it needs the top 10 carriers to hold the same percentage,'' he said.

However, another analyst said shipping stocks still provided high dividend yields to investors and noted that the current prices had dropped significantly from the peak period.

He agreed that shipping stocks always offered steady returns in yields, so longterm investors coming in with a reasonable discounted price would have the opportunity to gain from their investments.

For Thai Airways International Plc, capitalised at 74.75 billion baht, Ms Renu said the national carrier's share price was likely to pick up this year as the company had a better marketing plan, including route expansion. THAI will also benefit from realising fuel-charge revenues that would cover fuel costs, which represent about 30% of total expenses. THAI had a one-year TSR of -9.3%, threeyear 13.9% and 9.5% for five years.

A researcher from United Securities predicted an upside gain in price for BECL, capitalised at 16.4 billion baht, of 35% this year due to good operating performance.