Asian petchem stocks higher on hopes over US auto bailout

15 December 2008 12:30  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian petrochemical stocks tracked regional indexes on Monday on renewed optimism that the US automotive sector will get funds out of the $700bn rescue package intended for banks.

Regional markets rallied as investors looked past the dismal economic data from China and Japan, banking on hopes that the US will find alternative means to help its ailing auto industry after the collapse of the $14bn bailout plan last week.

Although petrochemical players are sanguine about the fundamental impact of the revised bailout package for US automakers, they felt a much-needed boost amid the prevailing gloom.

There are also hopes that the US Federal Reserve will again cut interest rates to boost its consumption-driven economy after its two-day meeting that will start on Monday.

At the close of trading, Japanese petrochemical stocks Asahi Kasei jumped 6.30%, Mitsui Chemicals surged 6.96% and Mitsubishi Chemical advanced 4.02% as the Nikkei 225 gained 5.21% at 8,664.66.

Hong Kong’s Hang Seng Index rose 1.98% at 13,411.96.

South Korea’s Hanwha Chemical soared 10.17%, LG Chem jumped 7.04% and SK Energy rose 2.47% as the KOSPI Composite index jumped 4.93% at 1,158.19.

Singapore’s Straits Times Index rose 1.98% at 1,774.76.

The health of the automotive industry is essential to buoy demand for petrochemicals like styrene butadiene rubber (SBR).

Asian economies, however, continued to feel pain from the global financial crisis.

China’s manufacturing output growth registered its lowest growth in nine years in November at 5.4%, while business sentiment in Japan plunged to its lowest level in more than three decades.

“The outlook for the global economy remains murky even as governments try to resuscitate growth and keep down unemployment, but the overriding indication is still pointing towards a global recessionary environment in 2009,” said a research note from Carmen Lee, research head at Singapore-based OCBC Research.

“In this environment, no sector will be spared as we have already witnessed job cuts across almost all industries, which has the effect of hurting consumer demand and property prices,” she said.

Major petrochemical companies have had to resort to massive retrenchment to cut operating costs and stay profitable. Dutch firm DSM was the latest to announce a 5% cut in its workforce.

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By: Pearl Bantillo
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