UpdateAsia chem stocks close lower on US crisis

30 September 2008 11:17  [Source: ICIS news]

(Adds closing levels of Asia markets, stock prices and quotes)

 

By Pearl Bantillo and Bohan Loh

 

SINGAPORE (ICIS news)--Asian markets and chemicals stocks closed down on Tuesday as hopes for a resolution to the widespread credit crisis were dashed when the US Congress voted down a $700bn bailout package late on Monday, economists and analysts said.

 

At 17:11 Singapore time (09:11 GMT), Singapore’s Straits Times index was down 0.10% at 2,358.91.

 

In Japan, Mitsui Chemicals fell 1.71%, Asahi Kasei slipped 3.09% and Mitsubishi Chemical fell 0.87%, as the Nikkei 225 index closed down 4.12% at 11,259.86.

 

In South Korea, LG Chemical was down 0.2%, Hanwha Chemical dipped 0.92% and SK Energy fell 3.26%, as South Korea’s KOSPI Composite index slipped 0.57% to close at 1,448.06.

 

However, Hong Kong’s Hang Seng index recouped initial losses to close 0.76% higher at 18,016.21. Chinese state-owned refiner PetroChina gained 1.01% and Sinopec rose 2.38%.

 

"A lot of fear is built into it. The Dow’s slump triggered the flight to safety. People are getting out of equity," said Lorraine Tan, equity strategist for Asia at Standard & Poor’s.

 

Risks of contagion for Asia’s banking system were not significant given its relatively small exposure to the US subprime mortgages and a crisis of the same magnitude as the Asian financial crisis of 1997 was unlikely, analysts said.

 

CFC Seymour analyst Dariusz Kowalzcyk pegged the subprime losses of Asian banks at about $25bn.

 

"Asian banks have not been hurt that much but there is the issue of sentiment and

panic, which is a global phenomenon," he said.

 

The shock defeat of the massive US rescue plan, which provided a mechanism for banks to unload illiquid assets, sent the Dow Jones industrials tumbling nearly 780 points, or about 7%, on Monday and sparked the heavy sell down in Asia.

 

"Right now the worry is whether there is going to be a package. Timing is important because policy makers are losing market trust," said Hong Kong-based Kowalczyk.

 

"With every day of declining market trust, the cost of bailout is rising, they should do more to reverse the decline in confidence. Passage of time is destructive," he added.

 

The Bush administration would have to come up with an alternative plan soon to stop the spread of market panic, analysts said.

 

"Something has to be passed here. Something has to be signed here. The US government has already seen a hint of what will happen if nothing is done," said Song Seng Woon, regional economist at CIMB-GK.

 

The US rescue plan was hastily crafted over the weekend following the major shakeup in the US financial sector, which saw the collapse of Lehman Brothers, the takeover of Merrill Lynch by Bank of America and the $85bn rescue of American International Group in just a week.

 

The list of casualties continued to grow, with the seizing of Washington Mutual last Friday and the government-orchestrated sale of Wachovia Group, the sixth largest bank in the US, to Citigroup.

 

European financial institutions were reeling from the US crisis, with the part-nationalisation of UK mortgage lender Bradford & Bingley and Belgian-Dutch financial institution Fortis on Monday.

 

Belgio-French municipal lender Dexia was the third list of bank bailouts in Europe.

Regional indices initially plunged between 3-6% taking the lead from the Dow’s unprecedented decline, but some managed to trim losses at the close of trading.

 

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By: Pearl Bantillo
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