General Market Review
Global shares fell in August amid investor concerns about the Chinese real estate sector. With Country Garden – a leading property developer – at the brink of default the property crisis deepened. Moreover, economic data from China came in weaker than expected. Exports fell by -14.5% y-o-y. The Caixin China PMI mfg. Index dropped to 49.2 points from 50.5 in the previous month. The MSCI World Index and the S&P500 lost -2.4% and -1.7% respectively whereas the MSCI Emerging Market Index dropped by -6.2%.
Economic data in the US were mixed throughout the month. Retail sales improved in July versus June. On the other hand, the manufacturing contracted further while the service sector growth slowed.
In the Eurozone business activity has dropped significantly. The HCOB purchasing manager index (PMI) dropped from a level of 48.6 in the previous month to 46.7, indicating a recessionary environment.
In the US, both headline and core inflation rose by only +3.2% and +4.7% year-on-year, respectively.
In the Eurozone, annual inflation remained at elevated levels with an increase in both the overall and core inflation rates of +5.3%.
In this environment, yields on 10-year US government bonds rose further from 3.95 % to 4.1%. Two-year US government bond yields closed the month nearly unchanged at 4.86%. Yields on 10-year government bonds in Germany fell slightly from 2.49% to 2.46%.
Energy and Transportation
Despite the Brent oil price rallying to $ 85 per barrel in July, Saudi Arabia has decided to prolong its 1mn – barrels per day cuts until the end of September. Additionally, Russia will cut exports by 300k barrels per day in the same period. Given the tight oil supply, the oil market was well supported during the month of August. The price of Brent crude rose from $85.4 to $86.8 per barrel at the end of the month. As a result, the STOXX 600 Oil and Gas Index gained +1.6% in August.
On the other hand, all transport segments recorded a weak performance. The Dow Jones Transportation Index fell by -5.1%, while the Russell 2000 Marine Transportation Index dropped by -2.6%. The dry bulk segment has shown weakness. Capesize rates decrease from $16k/day to $ 9k/day at the end of the month. In the container freight market, the SCFI (Shanghai Containerized Freight Index) decreased by -2% compared to the previous month. The SCFI index is down -64% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates slipped from $28k/day to $ 13k/day at the end of the month, whereas product tanker rates have remained well supported throughout the month. VLGC (Very Large Gas Carrier) rates remained at a very high level of around $100k/day at month-end.
Rising jet fuel prices have been putting increased pressure on Q3 earnings expectations. Against this back – drop airlines are managing higher wage costs. Pilot pay has increased significantly by up to 20% this year. At the same time fares appear to be softening. In this environment, the US Global Jets Index dropped by -10.2% in the month of August.
Fund Performance
The overall performance of the fund was flat.
The fund benefited from its hedging positions throughout the month. In particular short positions in the freight services and other transportation sectors have contributed positively. Additionally, a continuing firm product tanker market was able to support the fund’s long positions. Moreover, the offshore supply segment has continued to show strength. On the other hand, long positions in the dry-bulk shipping segments have contributed negatively as freight rates have remained at subdued levels.
For more information you can find our latest Fact Sheet – August 2023.
Seahawk Investments GmbH
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