UpdateAsian chemical shares slump on US recession fears

19 August 2011 10:46  [Source: ICIS news]

(updates closing share prices, closing indices, other details)

The shares of petrochemical companies in Asia fell on FridayBy Nurluqman Suratman

SINGAPORE (ICIS)--Asian chemical shares ended sharply lower on Friday, weighed by recession fears in the US and fresh concerns over the health of European banks.

A plunge in a US mid-Atlantic factory activity survey by the Philadelphia Federal Reserve Bank spooked financial markets as the data is viewed as a barometer of national manufacturing.

The result marked the weakest reading since early 2009, according to the Commonwealth Bank of Australia in a research note on Friday.

A fall in US home sales in July also stoked worries that the US economic recovery could stall and slide into a recession.

A dip in European markets on Thursday fanned further concerns over the economic health of the region.

Banks led the fall after a report that US regulators are stepping up scrutiny of the local operations for Europe’s largest banks on concerns the sovereign debt crisis may lead to funding issues, said UBS Wealth Management Research in a note.

Worries over demand dragged crude oil prices lower, with West Texas Intermediate (WTI) light sweet crude for September delivery down by $2.15/bbl to $80.23 at 17:08 hours Singapore time (09:08 GMT).

“Global crude oil prices fell on disappointment there was no concrete plan to address the euro debt crisis,” said Commonwealth Bank of Australia.

In the Asian chemicals markets, propylene spot discussions were put on the backburner on Friday following the falls in oil prices.

“Following the crude price drop, sentiment is quite unstable,” said a Japanese propylene trader.

Earlier this week, deals were heard done at $1,580-1,600/tonne (€1,106-1,120/tonne) CFR (cost & freight) NE (northeast) Asia for September arrival, but no firm discussions were heard on Friday morning.

On Friday, prices for butadiene rubber (BR) fell by CNY800/tonne ($125/tonne) to CNY32,500-34,500/tonne EXWH (ex-warehouse).

Chinese domestic styrene butadiene rubber (SBR) prices, meanwhile, fell by CNY500/tonne to CNY31500-33100/tonne EXWH.

Weak demand, bearish market sentiment and fears of a global slowdown have prompted traders to offload their material at reduced prices, exerting more downward pressure on prices.

The import prices of non-oil grade 1502 SBR fell by $100/tonne to $4,300-4,400/tonne CIF (cost, freight & insurance) China this week.

In Japan, the benchmark Nikkei 225 Index ended 2.51% lower at 8,719.24 points, with Mitsui Chemicals down by 5.01%, Mitsubishi Chemical falling by 2.97% and Asahi Kasei down by 3.63% at the close of trade.

The Nikkei stock average was hit by concerns about a 6.8-magnitude earthquake that hit the northeast region of the country at 14:36 hours Japan time (05:36 GMT).

In South Korea, LG Chem slumped by 14.69% and SK Innovation fell by 13.33%, with the Korea Composite Stock Price Index ending 6.22% lower at 1,744.88 points.

In Malaysia, PETRONAS Chemicals Group slipped by 2.58%, with the benchmark Kuala Lumpur Composite Index down by 1.29%, or 19.32 points, to 1,483.98 points at the close.

In Hong Kong, oil and gas producer and distributor PetroChina ended 4.09% lower, with the Hang Seng Index down by 3.08%, or 616.35 points, at 19,399.92 points.

China’s Shanghai Composite Index slipped by 25.11 points, or 0.98%, to 2,534.36 points at the close of trade.

“The recent violent equity market sell-off has brought unpleasant memories of 2008 back to investors' minds,” said UBS Wealth Management Research’s note.

“Following the many risk events financial markets had to absorb over the past months, the concern in focus now is a more fundamental one: global growth,” the note said.

“With uncertainty being the last thing equity investors want to deal with, and with no quick fix in sight for the global growth concerns, we expect market volatility to remain high,” it added.

Additional reporting by Peh Soo Hwee, Helen Yan, Sunny Pan and Miki Jiang

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Nurluqman Suratman

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