Asia petchem stocks surge on China currency shift

21 June 2010 10:00  [Source: ICIS news]

By Nurluqman Suratman

SINGAPORE (ICIS news)--Asian petrochemical stocks rallied on Monday after China signalled more flexible exchange regime for its currency yuan, also known as the renmimbi, over the weekend.

The People’s Bank of China (PBC) on 19 June said that it would proceed with reforms on the yuan’s exchange rate and make it more flexible in view of the recent weak economic market situations globally.

The Chinese central bank on Sunday clarified the statement it made a day earlier, saying a substantial appreciation in the currency was “not in China’s interests” and that the exchange rate would remain “basically stable”.

“An appreciation of its currency can have a positive impact on Chinese domestic demand and that is causing the rally in the (Asian) market right now,” said Song Seng Wun, regional research head at Malaysian brokerage CIMB-GK.

An appreciation of the yuan would benefit exporters and Chinese employment more than it hurts them, the Chinese central bank said in a statement on Saturday.

A more flexible currency would also help to curb consumer-price gains, asset bubbles and dependence on exports for growth, it added.

However, analysts earlier on Monday told ICIS that the price competitiveness of petrochemical products from China could be eroded as the government reforms its currency regime.

At 3.30pm Singapore time (0830 GMT), Japanese petrochemical majors were higher, with Mitsui Chemicals climbing 4.88%, Mitsubishi Chemical up 2.15% and Asahi Kasei up 1.41% as the benchmark Nikkei 225 index rose 2.43% at 10,238.01.

In Hong Kong, China’s state-owned refiner Sinopec gained 2.43% and oil and gas giant PetroChina surged 4.54% as the benchmark Hang Seng Index rose 3.12% to 20,919.87.

South Korea’s petrochemical majors were also higher, with Honam Petrochemical rising 2.56% and SK Energy up 4.78% as the Kospi composite index rose 1.62% at 1,739.68.

In India, most petrochemical companies including ONGC, Tata Chemicals and IOC recorded moderate gains of between 1-3% while oil major Reliance Industries rose 1.5% after declining on Friday following its annual general meeting.

The Bombay Stock Exchange extended gains in late morning trades with the Sensex rising 332 points to the day's high of 17,903.

RIL’s stock declined 1.5% on Friday after expansion announcements by company CEO Mukesh Ambani.

With additional reporting by Priya Jestin

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By: Nurluqman Suratman

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