22 October 2007 06:00 [Source: ICIS news]
SINGAPORE (ICIS news)--Asian oil and chemical stocks retreated together with the broader market on Monday on spillover sentiment from Wall Street’s sell-off on the anniversary of the 19 October 1987 crash.
Analysts, however, were not looking to downgrade their calls on chemical stocks as demand was expected to be strong even though a seasonal slowdown would occur in the fourth quarter.
Asian stock indexes fell on Monday following losses in the
“Today is a special day because the
He expected Japanese chemical stocks to rebound maybe later this week on good first-half earnings.
“For the second half, we still keep strong view for Japanese chemical makers,” he said, adding that demand would stay strong until the Beijing Olympics.
Shares of Korean majors such as LG Chem, LG Petrochemical and Hanwha Chemical fell 5-6% despite good third quarter results while Honam Petrochemical recorded the sharpest drop of 10% as investors took profit, JJ Kim, analyst at Woori Securities, said.
Chemical stocks were a safe haven for investors in the unstable global equity market as high crude oil prices will help sustain petrochemical prices, she added.
Demand was expected to slow in the fourth quarter compared with the previous quarter but
In the greater
“While CNOOC (China National Offshore Oil Corp) should benefit the most [due to its full exposure to the higher crude prices], PetroChina seems to do best as investors forget about fundamentals,” Brynjar Eirik Bustnes, analyst at JP Morgan, said.
“Personally I do expect CNOOC to outperform due to its underlying production growth (10-12% compound annual growth rate until 2010) which justifies a premium valuation to PetroChina which doesn't have any growth (except low return natural gas production).”
“Shin-Etsu, which makes polyvinyl chloride (PVC) in the
The impact on
South Korean chemical companies were also indirectly exposed to the
Despite the optimistic outlook for the chemical sector, Kim has advised investors to exercise caution as he expect prices to peak out in the fourth quarter this year or in the first half of 2008.
“A lot of people like chemical stocks. But prices went up so much and seasonal demand is slowing down. So I would advise investors to be a little cautious, he said.
He added that margins were expected shrink in the second half of 2008 compared with the first on increasing supplies in the
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