BUY OR SELL-Is the storm abating for Asian shipping firms?

* Chinese shipping stocks up 63 pct this year

* Japan/Korea shipping stocks underperforming Chinese rivals

* Goldman ups container ship sector to attractive

* INVESCO says risk reward in the sector unfavourable

By Alison Leung

HONG KONG, May 21 (Reuters) - The shipping industry has been sailing through troubled seas as the global recession takes a toll on trade, but Asian shipping stocks have rebounded in 2009 as investors bet on a recovery.

China COSCO (1919.HK) (601919.SS), China's top shipper and operator of the world's biggest dry bulk fleet, hit an eight-month intra-day high on Wednesday on the strengthen of dry bulk shipping rates, and is up about 65 percent this year.

The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship resources including iron ore, coal, cement, grain and fertiliser, rose 14 straight days to 2,665 points on Thursday, a fresh year high and four times its December low.

Container ship operators that are now losing money on overcapacity and weak demand have rallied even stronger, with China Shipping Container Lines (2866.HK) (601866.SS) and OOIL (0316.HK) up 85 and 77 percent this year. Is the worst over?

STEAMING AHEAD

Goldman Sachs upgraded its container ship stance to attractive from neutral, saying the sector is trading at a deep discount. It raised Taiwan's Evergreen Marine (2603.TW) and Wan Hai Lines (2615.TW) and Korea's Hanjin shipping (000700.KS) to buy from neutral and reiterated its buy for China Shipping Container Lines.

"Japan and Korea shipping stocks have also underperformed China's shipping sector even though the industry drivers are global," it said. Goldman also upgraded Mitsui O.S.K. Lines (9104.T) to buy from neutral.

The container shipping company sector currently is trading at an average of 0.7 times to 2009 book value against an historical range of between 0.3 to 3 times. The mid-cycle valuation is around 1.2 times for shipping firms but it should trade at a discount in the current market, analysts said.

Geoffrey Cheng at Daiwa Institute of Research recommended speculative buying of bulk shipping stocks, such as China COSCO and Sinotrans Shipping (0368.HK) on China's demand for commodities.

"It seems that traders are continuing to import iron ore, coal and other soft commodities," he said, adding some shipping firms had made huge provisions that brought down their costs.

Dry bulk freight rates should rise further at least in the short term with China's 4 trillion yuan stimulus package, which will lead to increased infrastructure spending.