Asian petchems weak on recession jitters

07 November 2008 04:00  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian petrochemical stocks remained in a losing streak on Friday, tracking overnight losses on Wall Street on fears of a deep and long global economic recession despite the interest rate cuts and fiscal packages being implemented across the world.

 

At 11:00 hours Singapore time (0300 GMT), Japanese petrochemical stocks Asahi Kasei fell 4.91%, Mitsui Chemicals shed 6.97% and Mitsubishi Chemical was 2.20% lower as the Nikkei 225 tumbled 4.35% at 8,512.29.

 

China’s state-owned oil refiner and petrochemicals giant Sinopec was down 2.21% and PetroChina slipped 1.79% while the Hang Seng Index was flat at 13,796.34.

 

South Korea’s LG Chem slipped 1.84% as the KOSPI Composite index was down 0.81% 1,083.39.

 

US markets bled for two consecutive sessions, shedding about 10%, immediately after Democrat Barack Obama’s victory as the next US President as investors’ focus went back to the world’s sagging economic fundamentals.

 

The European Central Bank’s 50-basis point cut in policy rates on Thursday failed to cheer the markets up.

 

“In light of the ongoing volatility in financial asset prices and dysfunctional credit market conditions combined with the lack of credit availability in the private sector, one could easily come-up with an utterly horrible economic forecast over the coming quarters,” said Thomas Lam, senior treasury economist at Singapore’s United Overseas Bank in a note.

 

“But in reality, it is still extremely challenging to accurately quantify the adverse effects of financial market conditions and tight credit conditions on the real economy,” Lam said.

 

Market optimism over the changing of guards at the world’s biggest economy proved short-lived while fresh US economic data and flashing red signals from corporate earnings appeared to confirm the plunge into recession is inevitable, analysts said.

 

The US economy could contract by more than 1.5% in the fourth quarter due to pullbacks in consumer spending, said UOB’s Lam.

 

The International Monetary Fund (IMF), a multilateral institution in charge of overseeing global financial stability, called on Thursday for more policy measures to stir back the rapidly slowing world economy into life as it slashed its already weak economic growth forecasts for this year and next year.

 

“World growth is projected to slow from 5% in 2007 to 3.7% in 2008 and to just over 2% in 2009, with the downturn led by advanced economies,” the IMF said in its World Economic Outlook update released yesterday.

 

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By: Pearl Bantillo
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