Asia petchem stocks take a hammering on US woes

03 October 2008 11:16  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian petrochemical stocks took a beating on Friday as investors fretted over the heightened possibility of a global recession, taking little comfort in efforts of both the US and Europe aimed at preventing a financial meltdown through bank bailouts.

 

Much weakened demand had slowed down trade in petrochemicals companies, with some product prices falling to record lows and it appeared the situation would not improve anytime soon, analysts said.

 

At the close of trading, Japan’s Mitsui Chemicals had fallen 4.29%, Asahi Kasei retreated 5.46% and Mitsubishi Chemical declined 4.72%. The benchmark Nikkei 225 index closed down 1.94% at 10,938.14.

 

In South Korea, LG Chemical was down 4.99%, Hanwha closed 2.36% lower and SK Energy fell 2.97%, as the KOSPI Composite fell 1.39% to close at 1,419.65.

Chinese state-owned refiner PetroChina slumped 5.28% at the close and Sinopec fell 2.56%, as Hong Kong’s Hang Seng index closed 2.9% lower at 17,682.40.

“The problems so far have already contributed to some slowing down in real sector activities and it looks like the world growth is going down another notch,” said David Cohen, chief economist at consultancy firm Action Economics.

 

A significant weakening of the US economy posed a threat to the region’s economic prospects because of trade links, he said, adding Asia counted the US among its biggest markets.

 

And with Europe and Japan also besieged by their respective economic problems, the region could not hope for an exports anchor, he said.

 

“Some slowdown in global export demand is inescapable. Even if demand from emerging countries shows a little more momentum, it will not upset further slowing in G3 [Colombia, Mexico and Venezuela] economies,” Cohen said.

 

The US Senate’s approval of a revised $700bn bailout package failed to cheer the market on Thursday and the weakness persisted ahead of the vote by the House of Representatives later on Friday.

 

“While the markets still remain hopeful the package will be passed by the [US] House of Representatives tonight, they have also been weighed down by concerns that the global economy appears to be slowing down more than before,” Cohen said.

 

($1 = €0.72)

 

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By: Pearl Bantillo
+65 6780 4359

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