Asian petchem stocks fall on stimulus withdrawal fears

25 September 2009 06:59  [Source: ICIS news]

By Pearl Bantillo

SINGAPORE (ICIS news)--Asian petrochemical stocks tumbled on Friday, in line with regional bourses, on concerns that fiscal stimulus will be withdrawn too soon and derail the ongoing economic recovery.

“What has happened so far in the economies and the markets was the result of the governments’ massive stimulus packages from China to Singapore,” said Song Seng Wun, Singapore-based research head at Malaysian brokerage CIMB-GK.

“Taking this away now is naturally a source of concern, especially if there are no clear signs that private sector is ready to spend,” he said.

China’s demand for petrochemicals had helped product prices to recover from a slump in late 2008 but there are also signs that this was slowing down, more notable in its once buoyant domestic polyester market.

In recent weeks, regional petrochemicals trade has substantially thinned down ahead of week-long National Day celebrations in China in October.

At 11.36am Singapore time (0336 GMT), Japanese petrochemical majors were down, with Mitsui Chemicals slipping 0.85%, Mitsubishi Chemical 2.95% lower and Asahi Kasei down 1.47% as the benchmark Nikkei 225 index fell 2.48% at 10,282.27.

In Hong Kong, China’s state-owned refiner Sinopec retreated 0.60% and oil and gas giant PetroChina declined 1.65% as the benchmark Hang Seng index slipped 0.82% to 20,871.76.

South Korea’s petrochemical majors also slipped, with Hanwha Chemical down 2.22% and Honam Petrochemical falling 1.83% as the KOSPI composite index fell 1.24% at 1,671.96.

Heavy pump-priming across the globe has achieved its desired effects – major economies like Japan, Germany and France emerged out of recession while the outlook for the US and South Korea has improved.

In emerging Asia, China and India look set to post better growths than initially expected according to the Asian Development Bank.

But when the effects of the stimulus packages wear off and there were no follow-through spending, investors were worried that economic activities would again lose steam, paving the way for a double-dip or a W-shaped recovery, analysts said.

“If you take the money out now, we may risk all these different (letters of) alphabets that are being thrown about,” said Song of CIMB-GK.

“As long as the stimulus packages support the economies and governments continue to keep a watchful eye, then the risk of a W-shaped recovery is minimized,” he added.

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By: Pearl Bantillo
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