Asian petchem stocks fall on flu pandemic concerns

27 April 2009 10:30  [Source: ICIS news]

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SINGAPORE (ICIS news)--Asian petrochemical stocks fell on Monday in line with the weakness in regional stock markets on concerns that a possible swine flu pandemic will further derail global economic recovery efforts.

At least 100 people are suspected to have died in Mexico from an outbreak of a new flu strain, with hundreds more hospitalised. Cases were also reported in the US, Europe and New Zealand.

“The market is already nervous about the clouds [of uncertainty] out there. On what started to look like a bottoming out in the global recession, this certainly would set it back,” said David Cohen, a Singapore-based chief economist with consultancy firm Action Economics.

The improvement in China’s demand for petrochemicals helped product prices to recover from the slump late last year, but these gains were still very fragile as global demand has yet to pick up, analysts said.

China’s state-owned refiners Sinopec and PetroChina fell 2.18% and 2.50% respectively in Hong Kong as the benchmark Hang Seng index retreated 2.74% to close at 14,840.42.

South Korea’s petrochemical majors also declined, with Hanwha Chemical down 3.08%, SK Energy 1.47 lower, Honam Petrochemical falling 4.73% and Kumho Petrochem down 3.57%. The KOSPI composite index shed 1.05% to 1,339.83.

Japanese petrochemical majors were mixed, with Mitsubishi Chemical easing 1.26%, Mitsui Chemicals up 1.30% and Asahi Kasei rising 0.74% as the benchmark Nikkei 225 index logged a 0.21% rise to 8,726.34 at the close of Monday’s trade.

The recent flu outbreak was reminiscent of the 2003 Severe Acute Respiratory Syndrome (SARS) epidemic that virtually killed the tourism industry in Asia and sent countries like Singapore into recession, analysts said.

“Health officials have issued some pretty stark warnings. I think it [swine flu outbreak] is still at an early stage at least, it won’t necessarily play out. But you can see why the market is nervous,” Cohen said.

“This seems to be more of a global fear – the fact that there are some already potential cases in Europe US, and New Zealand,” said Cohen. “It certainly has everybody scared.”

Asian markets’ reaction can be considered subdued so far but everything would depend on how the events pan out in the next few days, he said.

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By: Pearl Bantillo
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