Asian petchems stocks gain on hopes of better Q3 earnings

23 October 2009 06:08  [Source: ICIS news]

By Pearl Bantillo

SINGAPORE (ICIS news)--Asian petrochemical stocks gained on Friday on hopes that third-quarter earnings would fare better than the second as the global economy gradually recovers from a deep slump.

China, the world’s third largest economy and a major importer of petrochemicals, grew at a faster clip of 8.9% July to September from a 7.9% clip in the June quarter, spelling good news for industry players in the region.

“The macro numbers are not coming out too badly and earnings generally have been supportive of the recovery story,” said Song Seng Wun, regional research head at Malaysian brokerage CIMB-GK.

“[Profit] guidances, by and large, have remained favourable,” he said.

Japanese chemical major Asahi Kasei has substantially raised its net profit guidance for the first-half-to-September to Y4bn, citing strong improvement in sales volumes.

At 12:23 pm (05:23 GMT), Japan’s listed majors gained, with Asahi Kasei up 1.74% and Mitsui Chemicals rising 2.53% as the benchmark Nikkei 225 index rose 68.05 points or 0.66% to 10,335.22.

In Hong Kong, China state-owned refiner Sinopec gained 2.98% and PetroChina rallied 3.56% as the benchmark Hang Seng index advanced 345.83 points or 1.56% at 22,556.35.

Crude’s spike above $81/bbl this week has been borne of optimism about the global recovery underway, analysts said, although some doubted the sustainability of the price gains.

Prices of a number of petrochemical products have either stabilised or started to increase in line with higher crude values and with China’s come-back to the market after staying out for eight days.

“You are in an environment where, I suppose, people are trying to see whether the positive mood over the last six months is generally correct. The numbers so far seem to support that, so nobody is too upset,” said CIMB-GK’s Song.

 “Generally, expectations have remained fairly positive,” he added.

Analysts expect China to post a stronger economic growth in the fourth quarter, backed by the government’s fiscal stimulus and heavy lending. This should buoy up the country’s demand for petrochemical products.

“If you were in Asia, [you will] benefit from [the] Asian economic growth,” Peter Huntsman, CEO of US chemical producer Huntsman Corp, told ICIS news in a recent interview.

Huntsman said he was positive on the prospects of “those differentiated or specialty businesses that are geographically diversified” but warned that commodity chemicals such as styrenics, polyethylene and polypropylene “would be hit very hard because of the excess capacity that is coming on in the Middle East”. 

“[In the] short-term, you will continue to see Asia doing well. Europe will be gradually improving and North America would be very sluggish,” said the Huntsman executive.

“I do think global recovery will take us longer than most people think,” said Huntsman, adding that he saw no turnaround taking place in North America in the next six months.

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By: Pearl Bantillo
+65 6780 4359

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