Asia petchem stocks plunge for second day

22 January 2008 05:32  [Source: ICIS news]

By Florence Tan

SINGAPORE (ICIS news)--Petrochemical stocks across Asia plunged for a second consecutive day this week as markets collapsed on concerns of a US economic slowdown.

While fundamentals for some Asian petrochemical companies were still strong, the US economic slowdown could weaken demand, analysts said on Tuesday.

“It will take a quarter or two to confirm weak demand will occur. This could be a very big risk,” Thomas Yi, analyst from Samsung Securities, said.

Weak demand could become another burden for the petrochemical industry which was already weighed down by high crude oil costs, he said.

However, crude oil prices were expected to stabilise at $80/bbl because of the overall weak market conditions, he added.

Shares of South Korean petrochemical firms posted the sharpest fall of 4-12%, lower than the 4.2% decline at the Korea Composite Stock Price Index (KOSPI).

Companies with high petrochemical exposure such as Honam saw its shares plunged 12% to won (W) 77,200 ($81.4) by mid-day. SK Energy also fell 7.5% to W116,500 on expectations of a poor fourth-quarter result, Yi said, adding that its share price plunged over 40% in the past three months.

LG Chem, which saw a 7% fall in its share price to W68,800, would be cushioned by new output at its information and electronics business, Yi said.

In Hong Kong, PetroChina and Sinopec shares plunged 10.3% and 6.2% respectively while the Hang Seng index fell 7.1%.

Taiwanese stocks under the Formosa Plastics Group were down 5-7% by mid-day, in line with a 6.5% fall at the Taiex index.

Shares of Japanese majors Asahi Kasei and Mitsubishi Chemical fell around 4% while Thai majors PTT and Siam Cement were down 2% and 0.9% respectively.

The direct exposure to the US market for Japanese companies, except for Shin-Etsu Chemical, was small, Nomura Securities analyst Yu Okazaki said.

However, Nomura did not cut its earnings forecast for Shin-Etsu, a major polyvinyl chloride (PVC) supplier in the US, as its third-quarter results were in line with expectations, he added.

“We [are] worried to see stocks falling. But [company] earnings, we are optimistic,” Okazaki said, adding that strong demand from China was expected to support growth.

($1=W948.52)


By: Florence Tan
+65 6780 4359



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