The ZIM stock price has remained in a technical bear market, declining by over 37% from its peak in December. It was trading at $12.95 on Monday, dragging its market cap from $3.26 billion to the current $1.56 billion. So, is ZIM a good buy as the World Container Index drops?

Container shipping prices are falling

ZIM Integrated is a top shipping company listed in the United States. It is the tenth biggest player in the industry, and is known for focusing on niche routes the Pacific, Latin America, and the Cross-Suez areas. 

The company is also known for its business model. Unlike other companies that contract and own ships, ZIM focuses on charters, making it an asset-light business. This model also ensures that it has newer and more energy-efficient ships.

ZIM Integrated and other shipping companies are currently experiencing a challenging period. This started during the pandemic when demand for Chinese goods rose in countries like the United States and Europe. 

Shipping demand then slowed after the pandemic as the world dealt with soaring inflation and high interest rates. These events led to ZIM Integrated’s annual revenue falling from $12.5 billion in 2022 to $5.16 billion.

It also affected its profitability, which in turn impacted its dividend payments to investors. It reported a net loss of $2.6 billion in 2023. 

The company’s business began to improve in late 2023, as shipping rates increased due to the war in Ukraine. It has also been affected by the crisis in the Middle East and the Panama Canal.

At the same time, there are rising concerns about the ongoing trade war that may impact the volume of goods traded globally. Trump has implemented a 145% tariff on all goods from China, and a universal levy on all goods brought to the country.

Analysts believe that some large customers may decide to reduce their orders as they address their supply chain issues. This explains why container shipping costs have plunged in the past few months. 

The Drewry World Container Index (WCI) plunged to $2,192 last week, down from a high of $5,806 last year. As shown below, the trend is going downwards, a sign that it will continue falling in the near term. 

Is the ZIM dividend yield safe?

Investors allocate money to ZIM Integrated for its high dividends. According to SeekingAlpha, it has a dividend yield of 91%, while Google places the yield at 55.15%. 

The most recent results published in March showed that ZIM had a net income of $563 million in the fourth quarter, a big turnaround for a company that lost over $147 million in the same period a year earlier. 

Its fourth-quarter revenue of $2.8 billion was 80% higher than a year earlier. The annual revenue rose by 63% to over $8.43 billion. 

Analysts are pessimistic about ZIM’s business this year as shipping rates fall. The average estimate is that the first quarter revenue will be $1.84 billion, a 17.8% increase from the same period last year. However, its annual revenue is expected to drop to $6.53 billion this year and $5.94 billion next year, respectively. 

Therefore, with shipping costs and profits expected to fall, there is a risk that the company will cut its dividend this year.

ZIM Integrated stock price analysis

The daily chart shows that the ZIM share price has plunged in the past few months. It has dropped from a high of $20.7 in November last year to $13 today. 

The stock formed a death cross pattern as the 50-day and 200-day moving averages crossed each other. It has also moved close to the 50% Fibonacci Retracement level.

Therefore, there is a risk that the stock will keep falling this year, with the main target being the psychological point at $10.

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The Dow Jones Index has entered a correction this year, having dropped by over 13% from its highest level. The index, which tracks 30 blue-chip companies, was trading at $39,100, and has recently formed a death cross for the first time in over three years. This article examines the three primary reasons for its crash and how its stocks are performing.

3 reasons why the Dow Jones Index crashed

There are three main reasons why the Dow Jones Index has plummeted this year. First, it has dropped because of the Federal Reserve, which has maintained a more hawkish tone this year. It slashed rates three times last year, and pointed to two more this year even as the economy slows.

Most Fed officials who have talked recently have said that the bank was ready to intervene if the economy slowed drastically.

At the same time, Donald Trump is studying whether he has the power to fire Jerome Powell from the Fed. Such a move would be unprecedented and would raise questions about the bank’s independence.

Historically, US assets, such as stocks and the US dollar, have performed well due to the perceived independence of the Fed.

Second, the Dow Jones Index has also plummeted due to the ongoing trade war, which risks pushing the US into a deep recession. The base 10% tariff and the 145% rate from China has raised concerns that the US economy will continue weakening. Analysts believe that corporate earnings will be impacted.

Third, the Dow Jones has declined due to its exposure to technology. It holds tech companies like Microsoft, Apple, Salesforce, and NVIDIA. While these are all good companies, there is a risk that they will slow down as signs that the AI bubble is bursting emerges.

Dow Jones Index stocks performance 

Most companies in the Dow Jones Industrial Average have declined this year. Still, some all-weather firms have done well because they are less exposed to US tariffs on other countries.

Coca-Cola stock price has jumped by 17% this year because its business does well in all market conditions. Customers will not stop drinking soda because of a recession or stagflation. 

Verizon stock has risen by 10% this year, while Johnson & Johnson, IBM, McDonald’s, Amgen, Travelers, Visa, and Walmart have all risen by over 4%. These firms – except IBM – are all-weather companies that are less exposed to tariff measures. 

Nike is the worst-performing Dow Jones stock this year as it crashed by 27%. This decline is due to the company facing substantial competition from firms such as On Holding, Adidas, and Under Armour. Also, the management’s efforts to turn around the firm are taking longer to achieve results.

Tech firms like Salesforce, NVDIA, Amazon, Apple, and Microsoft have all plunged by over 22% this year. This decline is due to the woes in the technology sector and its perceived overvaluation. 

The other top laggards in the Dow Jones are firms like Walt Disney, Caterpillar, American Express, and Honeywell International.

Looking ahead, the Dow Jones price action will depend on the Fed and Donald Trump. A sign that the Fed is prepared to cut interest rates will be bullish thing for the index.

Further, the start of negotiations with other countries, especially China, will be a bullish thing for the index. 

The ongoing earnings season will largely have no major impact on the Dow Jones and other US indices as the results don’t include Trump’s tariffs. 

History shows that the Dow Jones and other US indices like the S&P 500 and Nasdaq indices, always recover from a correction. 

Read more: Is it safe to buy the dip in the S&P 500 index ETFs like SPY and VOO?

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A fortnight ago, investors were counting down the hours to President Trump’s announcement of ‘reciprocal tariffs’. Global stock indices, led by the US majors, were already exhibiting evidence of investor concern.

The Dow and the Russell 2000 (a less popular stock index, but an important indicator of the mood towards US mid-cap, domestically-focused corporations) had both peaked in November.

The S&P 500 and NASDAQ, which both contain a significant weighting towards the tech giants, hit their all-time highs in mid-February. 

Since then, all the US majors sold off, taking them back below levels last seen just after Trump’s election victory on 5th November. They had a mild recovery in the latter half of March.

But it was evident that investors were becoming wary. The feeling was that tariffs could go either way. President Trump could announce a modest baseline tariff on those countries he believed were acting ‘unfairly’.

Or he could do something worse. In the end, he did something much, much worse. 

Most tariffs went through a fairly rapid ‘process’ of being postponed, altered and retargeted. But given what has happened since, it looks as if the 10% baseline tariff across exports from the US’s trading partners is much more in line with what the markets were hoping for.

Although in the absence of a string of successful country-by-country negotiations, these could revert to the original reciprocal rates in three months’ time. 

But one thing now looks certain, and that is that the Trump administration’s real target in all this brouhaha is China.

Add in the bellicose rhetoric and thin skins on both sides, and the tariff tiff has morphed into an all-out trade war. Investors are now trying to work out if this can be resolved, and if so, how long it could take.

Analysts have all come up with opposing theories over which side stands to be worst affected, and who is most likely to blink first. One argument goes that President Trump’s readiness to water down most tariffs is a sign of weakness. Maybe.

Although the fact that he ramped up China’s levies to 145% suggests not. It’s also said that China’s authoritarian regime is in a better position to accept hardships on its citizens in a way that Trump can’t.

But China’s economy is in a poor state, no matter what the data says, and its property implosion means that it can’t rely on its domestic market to replace its export market. 

On the other hand, it looks as if the Trump administration may have panicked when US Treasuries went into meltdown. It could accept a sell-off in equities, but not a threat to the world’s ultimate safe-haven asset.

The yield on the 30-year yield had its biggest weekly jump since the 1980s, even as the US dollar was in freefall. It looked as if something had burst. 

Was China to blame? It seems unlikely that they were wholly responsible for the bond market sell-off. It would largely be self-defeating given how much US government debt they own.

Also, such a move would push up the value of the yuan, which would only make life more difficult for Chinese exporters.

It seems more likely that the dislocation between the dollar and US Treasuries was largely due to massive deleveraging by hedge funds and the shadow banking system. 

Markets were a touch calmer in the week leading up to Easter. But it doesn’t feel like the crisis has peaked yet.

The egos involved are just too big, and the stakes far too high. At some stage, this will be resolved. But risk markets look likely to suffer a lot more pain before things get back on a more even keel.  

(David Morrison is a Senior Market Analyst at Trade Nation. Views are his own.)

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