05 July 1999 00:00 [Source: ACN]Chinese and South Korean markets perform especially well
Asian markets continued to make strong gains throughout June. The Chinese and South Korean markets were especially strong. Chemical shares generally outperformed domestic markets.
With barely a pause for breath, the listed Chinese H-shares continued to climb throughout June, backed by the continuing flow of capital back into the China-linked equity markets. The Hang Seng index rose towards the 14 000 level, while the domestic A share market in China saw a flurry of speculative activity. Specific corporate news from the chemical sector remained limited.
The worries surrounding the Taiwanese market in May faded somewhat in June and the index pushed ahead towards the 8500 level. The main driver behind the gain was the continued rise of the electronics sector, which itself was buoyed by gains in the Nasdaq high-technology stocks in the US.
Aside from Taiwan Polypropylene, the stocks in our coverage all advanced over the month. However, only Formosa Plastics really managed to outperform the market, helped by renewed positive sentiment surrounding its current round of expansion.
In South Korea, stocks such as LG Chemical and SK Corp built on earlier gains to remain the best performers. The overall market was also strong against continued background signs of recovery in the domestic economy and seemed to shrug off concerns over increased tension with North Korea. LG Chemical announced plans to expand production of ABS and PVC in China (ACN 28 June, p21), strengthening its position in these domestic Chinese markets. LG also announced a Won100bn (US$85.95m) bond issue, to mature in 2002.
Chemical-sector interest in Thailand focused on movements in the shares of Thai Petrochemical Industry (TPI) and Vinythai. Both made substantial gains during June. In fact, TPI is now the top outperformer of all the shares in the ACN coverage so far this year, helped by the mid-month announcement that over 90% of creditors have accepted its debt-restructuring proposal. Vinythai benefited from inclusion in the revised Stock Exchange 50 index.
The Indonesian market remains the best among those in our coverage over the year to date. Aside from direct political considerations, primarily the recent general elections, the market was influenced by the continued recovery in the rupiah and by the prospect of lower interest rates. Note, however, that although the firmer rupiah is a positive sign in a general sense, it does have an impact on the ability of individual companies to export products such as polyester.
TriPolyta missed a bond payment due on 1 June and consequently suffered a debt-rating downgrade by Standards & Poors (S&P), to D, from CC. S&P cited 'extremely limited' near-term liquidity. The company itself indicated an intention to restructure its US$185m 113/8% seven-year notes.
Background sentiment for the Indian market continued to be dominated by concerns over the current military action in Kashmir. Although generally holding above the 4000 level, the index dipped mid-month as tension intensified. Renewed worries also induced some profit-taking at the end of June.
Reliance's AGM statement indicated that the company is faring well in the first quarter of its current financial year and confirmed plans to expand its Hazira cracker to 1m tonne/year, from the current 750 000 tonne/ year (see p28).
Boosted by a better-than-expected Q1 GDP figure and renewed overseas buying interest, the Japanese market made steady gains during June and easily broke through the 17 000 level.
At the stock level, Mitsubishi Chemical held onto its position as the best performer from Japan in the Sharewatch coverage. The shares were heavily traded during the month, helped by the announcement that it is to cease DMT production and buy from SK Corp instead. Background news for Showa Denko centred on the official announcement concerning the company's involvement in the Montell Sunrise PP joint venture.
|Value||Value||% change||Value||% change|
|24 Jun 1999||4 Jan 1999||year to date||23 Jun 1998||12 months|
|Yizheng Chemical Fibre||1.73||0.70||147.1||0.89||94.4|
|HS China Index||562||388||44.8||448||25.4|
|Far East Textile||51.0||26.3||93.9||24.2||110.7|
|Nan Ya Plastics||56.5||41.5||36.1||39.5||43.0|
|Taiwan Styrene Monomer||33.5||29.5||13.6||24.1||39.0|
|South Korea (Won)|
|National Petrochemical Corp.||36.5||16.8||117.9||16.0||128.1|
|Thai Petrochemical Industry||26.8||6.0||345.8||3.7||623.0|
|Thai Plastics and Chemicals||66.5||60.5||9.9||73.0||(8.9)|
|Bangkok SET Index||544||357||52.4||274||98.5|
|TriPolyta ADRs (US$)||1.38||0.41||236.6||1.06||30.2|
|Gujarat Alkalies and Chemicals||27.0||28.0||(3.4)||37.5||(28.0)|
|Indian Petrochemical Corp||102.4||57.2||79.2||50.5||102.8|
|Bombay 30 Index||4120||3122||32.0||3037||35.7|
|Nikkei 225 Index||17628||13416||31.4||15055||17.1|
Source: Deutsche Bank Research
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