How does the stock of BW LPG compare with FFAs and asset prices?

BW LPG is now a pure-play Very Large Gas Carrier (VLGC) operator, after the delivery of the last of its Large Gas Carrier (LGC) to the new
owners in 1Q20. In addition, the company is primarily a spot market operator. This spot market strategy for a pure-play VLGC operator
has worked well, as the market showed a lot of strength in April-May this year and then most recently in August-September. As such not
only did the company prosper financially but the investors of BW LPG also benefitted from the bull run in the LPG market.
Freight forwarding agreements or FFAs, asset prices and stock prices are often assumed to move in tandem as they are all functions of
the TC rates secured by the vessels. But what could be the degree of correlation between these elements and what are the likely factors
that drive the correlation?
The stock of BW LPG displayed a strong corelation with the FFAs of various expiries as stock prices of asset-heavy operators are
statistically aligned with FFAs, asset prices and vessel earnings, which in turn are functions of TC rates/expectations of TC rates. In
addition, these factors also have a strong connect with the underlying market and a stock’s performance relative to the market.
FFAs by nature are futuristic and are a quantification of the underlying market expectations during a particular period. These over-thecounter
contracts act both as investment and insurance for the market players. It is therefore logical that a contract issued