Shares of COSCO SHIP ENGY (01138) have extended their decline, falling more than 6%. At the time of writing, the stock is down 6% to HK$13.48, with a turnover of HK$117 million.

Reports indicate that Iran's Islamic Revolutionary Guard Corps fired at least two missiles at several merchant ships transiting the Strait of Hormuz. Two vessels were struck and sustained significant damage, though no casualties were reported.

While commercial shipping traffic through the Strait of Hormuz is gradually resuming, significant uncertainty remains regarding safe passage. Transport capacity, shipping efficiency, and market confidence have yet to recover to pre-conflict levels.

Analysts note that tanker stocks, including COSCO SHIP ENGY, have pulled back to replacement cost levels, influenced by a retreat in VLCC TD3C time charter equivalent (TCE) rates and the recent ship attacks. The H-share and A-share valuations of the company are currently at just 0.8x and 1.1x replacement cost, respectively.

As traffic through the strait slowly recovers, a cautious sentiment prevails in the market. A scarcity of available VLCC cargoes from the Persian Gulf is leading to high volatility in TD3C freight rates.

It is suggested that investors look beyond short-term freight rate fluctuations, as the fundamental outlook for the sector remains sound.