US recession fears hit Asia petchem stocks

03 March 2008 07:22  [Source: ICIS news]

SINGAPORE (ICIS news)--Shares of most petrochemical companies in Asia fell around 3% on Monday in line with regional stock indices as fears of a recession in the US and high crude oil prices spooked investors.

Japanese petrochemical majors Sumitomo Chemical, Mitsui Chemicals and Mitsubishi Chemical saw their shares plunge around 5%, more than the 4% loss in the benchmark Nikkei average, as they were more exposed to the global economy, Yu Okazaki, chemical analyst at Nomura Securities, said.

“Investors were worried about US demand for Asia petrochemicals,” he said, adding that a weak dollar would also lower earnings from the companies’ overseas subsidiaries.

Strong petrochemical demand in Asia had helped offset high crude oil prices, but raw materials were becoming too expensive to be passed on as consumption weakened, Okazaki said.

Buyers of aromatics in Asia held back on Friday despite crude rising over $103/bbl while prices for olefins such as propylene and butadiene (BD) hit peaks.

Stock indices in Asia fell in line with a drop at the Dow Jones Industrial on Friday after US economic data confirmed a slow growth in the fourth quarter and unemployment claims rose.

Shares of South Korean majors Honam Petrochemical, Hanwha Chemical and SK Energy fell around 4% while in Hong Kong, PetroChina and Sinopec lost 3-4% of their values.

Shares of S-Oil and LG Chem however beat the trend, JJ Kim, chemical analyst from Woori Securities, said.

“The refiner is not so sensitive to strong crude prices and global credit risk as it has a good financial structure and highly efficient plants,” he added.

LG Chem was supposed to be affected by high crude prices, but they were bullish about their first quarter earnings because of their electronics business, Kim said.

In Taiwan, shares of Formosa Plastics and Nan Ya Plastics beat the trend, rising by around 1%, but affiliate Formosa Petrochemical, a major refiner, saw its stocks dip 1.5%.

Thailand’s PTT Chemical fell 1.7% despite a 0.2% rise in the local index after the Thai government lifted capital controls which stemmed a stock market slide.

By: Florence Tan
+65 6780 4359

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