Scenario analysis for container shipping investment strategies
Shipping market is of high volatility and is susceptible to freight rate fluctuations, hence it is extremely difficult for investors to employ appropriate investment strategies in the midst of uncertainties, in order to maximise opportunities and profits as well as minimise risks and losses. This pa...
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| Format: | Final Year Project |
| Language: | English |
| Published: |
2019
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| Online Access: | http://hdl.handle.net/10356/78612 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | Shipping market is of high volatility and is susceptible to freight rate fluctuations, hence it is extremely difficult for investors to employ appropriate investment strategies in the midst of uncertainties, in order to maximise opportunities and profits as well as minimise risks and losses. This paper applies scenario analysis in evaluating ship investment decisions of various container ship investors, formulating plausible scenarios and rational investment strategies accordingly. Although scenario analysis is a useful planning tool in decision-making, research has shown that it is rarely linked with the formation of investment strategies, especially in the shipping industry. This paper focuses on the container sector, and common variables that affect investment decisions are analysed in the literature review part. Annual financial reports from the top five public container companies of the last ten years are collected, and their newbuilding, selling, buying and scrapping patterns are studied. The market condition of the last decade is examined, and a comparison of investment strategies among these five companies is made. A 2x2 scenario matrix model is then developed, in order to further formulate reasonable investment strategies based on the 4 distinct scenarios. Results show that decisions of investors are affected by the variables stated under each scenario. Scenario analysis serves as a useful planning tool for investors to evaluate the market condition under uncertainties. However, investment strategies formulated based on the scenario model should be further contemplated in practice. Detailed strategic investment decisions of each company are made according to each investor’s business profile, which is influenced by their business philosophy and model. |
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