The oil price crash on Monday (20 April) to a historic level as prices became negative for the first time ever. This write-up looks at the trend of stock prices of two companies, Keppel and Sembcorp, in response to the crash in oil prices.
The two graphs below chart the movement of the stock prices for both companies from 2 March until 21 April. The fall major decline in stock prices in March is caused by the dual-impact of COVID-19 pandemic as well as the oil price war.
Keppel Corp is a Singaporean conglomerate consisting of a few affiliated businesses that specialises in offshore & marine, property, infrastructure, and asset management businesses. Based on the graph below, the trend of stock prices for Keppel follows an almost U-shaped curve.
On Tuesday (21 April), the stock prices of Keppel only fell a little bit from 5.68 to 5.64 on Monday. This is just a -0.04 decline. It shows that the historic fall in oil prices did not affect the stock prices as much. Percentage change is -0.7 per cent.
Sembcorp is a leading utilities and marine conglomerate involved in the utilities, energy, and water industries with clients and customers not only locally in Singapore, but also in Asia, United Kingdom, and Middle East.
Also, the Sembcrop is involved in marine and offshore engineering and a provider of environmental and industrial park management services in the region. The trend shown by the stock prices graph for Sembcorp is similar to Keppel’s U-shaped.
The prices fell from 0.725 on Monday to 0.685 on Tuesday. Similar to Keppel corp, Sembcorp’s total decline is the same at -0.04. This shows that the company is also not strongly affected by the negative oil prices. Percentage change is -5.5%.
Comparing Keppel and Sembcorp
One thing to note is that, both changes from 20 April to 21 April in both companies are not identically reflected in the graphs despite the same value of decline. For example, the graph looks steeper in the case of Keppel corp compared to Sembcorp.
The reason is that the scale used for plotting Keppel’s graph is larger whereas the scale used is smaller for the case of Sembcorp.
Secondly, while it is clear and natural that the stock prices of both companies are different, the identical value of decline is a point of interest. In terms of industries that both companies dabble in, Keppel is more diverse than Sembcorp.
Both companies have one thing in common, which is the marine and offshore industry. Sembcorp, on the other hand, is also involved in the energy sector.
Therefore, perhaps the expected fall in Keppel’s stock prices to be less than the fall seen in Sembcorp. Keppel has the buffer from the oil prices crash in that its investment portfolio is more diverse; losses in one sector can be made up by gains in other sectors.
On the other hand, Sembcorp is involved in the energy sector in addition to the marine and offshoring sector, so oil price changes should theoretically bring two potential impacts on the company. So, the stock price should have fallen by a larger margin.
Nonetheless, although the value of decline is identical for both, percentage change is not the same. As expected, Sembcorp experienced a higher percentage decline at -5.5 per cent compared to Keppel at -0.7 per cent.
The degree of change over time is higher for Sembcorp compared to Keppel because of the sectoral concentration and diversification differences between the two companies, and thus their degree of vulnerabilities are also different to a certain extent.