UpdateAsia petchem stocks hit by fears of slump

18 September 2008 10:57  [Source: ICIS news]

(adds closing prices of stocks in last three paragraphs)

SINGAPORE (ICIS news)--Shares of petrochemical stocks in Asia closed lower on Thursday as growing fears of a global recession battered the markets all over the world following the major shake-up in the US financial system this week.

The collapse of Lehman Brothers, the takeover of Merrill Lynch by Bank of America and the $85bn dollar rescue of insurance behemoth American International Group flayed investors’ nerves as these events just heightened the risk of a severe global economic downturn.

 "The financial markets globally are under quite a lot of heat," said Vishnu Varathan, economist at consultancy firm Forecast.

The plunge into recession will "depend on how the credit [crisis] can be contained at this juncture," he added.

Asia’s vulnerability lies in its reliance on exports as a key growth engine and its dependence on US as a major market.

Dow Industrial set the tone for the market rout, shedding 4.06 points on Wednesday after AIG’s bailout by the Federal Reserve.

The move left many investors wondering about which financial institution would topple next, analysts said.

"In the coming weeks or months, markets are likely to remain very edgy," said Thomas Lam, treasury research analyst at United Overseas Bank. "The odds of continued volatility remain high."

Trade in petrochemicals had been sluggish for months due to weak demand as people cut back on consumption and the industry may be in for its worst downturn since the Asian financial crisis of 1997, analysts said.

At the close of trading, Japanese chemical major Asahi Kasei slipped 4.54%.

Chinese state-owned refiner Sinopec managed to trim losses to close just 0.17% lower. Hong Kong’s Hang Seng Index was little changed at 17,632.46.

In South Korea, Hanhwa Chemicals closed 3.11% lower, SK Energy was off 0.45% and LG Chemical down 0.45%. South Korea’s Kospi 100 index was down 2.69% at 1,326.32.

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By: Pearl Bantillo
+65 6780 4359

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