Asia petchems weak as recession hits Japan

17 November 2008 10:00  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian petrochemical stocks closed weaker on Monday as Japan’s plunge into recession provided further evidence that the global economy is bracing for a significant downturn, dimming exports prospects.

“They are bad news for chemical producers,” said Li Hongrong, a Shenzhen-based economist at Ping An Securities. "If they could not cope with the tough situation well, they will face losses."

At the close of trading, Japanese petrochemical stocks Asahi Kasei was down 3.78%, Mitsui Chemicals was off 0.88% and Mitsubishi Chemical eased 0.54% while the Nikkei 225 gained 0.71% to 8,522.58.

China’s state-owned oil refiner Sinopec was off 0.66% and PetroChina 0.34% lower as Hong Kong's Hang Seng Index closed 0.10% lower at 13,529.53.

South Korea’s LG Chem fell 4.71% and SK Energy was down 1.90% as the Kospi Composite index slipped 0.91% to 1,078.32.

Japan’s economy, the world’s second largest, contracted by 0.1% in third quarter from the second, remaining in the negative territory after registering a 0.9% quarter on quarter decline in the April-to-June period.

“The numbers for Japan was just slightly weaker than people had expected. The sense is that growth will remain depressed for another couple of quarters and will hopefully bottom out in the middle of 2009,” said David Cohen, chief economist at Action Economics.

The markets' reaction was largely muted since investors have been pricing in a recession scenario and possibly taking comfort from assurance from world economic leaders that further measures would be taken to contain the economic impact of the global financial crisis, analysts said.

“Policy-makers have had some success in calming the credit markets (but) it still remains to be seen whether things could get back to normal,” said Cohen.

South Korea, China and Japan had earlier announced massive fiscal stimulus packages to complement interest rate cuts aimed at boosting consumer spending in their respective economies.

Judith Wang contributed to this story
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