Asia petchem shares fall as concerns over Europe debt crisis grow

20 January 2012 05:39  [Source: ICIS news]

By Pearl Bantillo

(recasts, removing references to SK Innovation in fourth paragraph)

SINGAPORE (ICIS)--Shares of petrochemical companies in Asia tumbled on Monday on concerns over a worsening debt crisis in Europe after Standard & Poor’s (S&P) lowered the credit ratings of nine countries in the eurozone.

Asia is vulnerable to the economic woes of the industrialised West because Asia is reliant on exports for growth. Exports from Asia will be badly affected if another recession were to hit the US and the eurozone.

At 12:44 hours Singapore time (04:44 GMT), Mitsubishi Chemical was down by 0.95%, Mitsui Chemicals slipped by 2.57% and JX Holdings declined by 2.39%, with the benchmark Nikkei 225 index dipping by 132.26 points or 1.56% to 8,367.76.

In South Korea, Kumho Petrochemical declined by 5.72% and LG Chem slipped by 0.87% as the KOSPI composite index retreated by 27.56 points or 1.47% to 1,848.12.

In Hong Kong, Shanghai Petrochemical was down by 0.67% and PetroChina fell by 2.0% as the Hang Seng index declined by 182.57 points or 0.95% to 19,021.85.

The China Shanghai composite index decreased by 12.60 points or 0.56% to 2,231.98.

Recession risks have heightened in the eurozone after France and Austria lost their AAA investment grade sovereign rating, while Italy, Spain and Portugal received a two-notch downgrade last Friday.

“The outlook on the ratings for all but two eurozone sovereigns are negative (indicating at least a one-in-three chance that the rating will be lowered in 2012 or 2013),” DBS Bank Research said in a note.

The US, the world’s biggest energy consumer, lost its AAA rating in early August 2011.

With the industrialised economies of the West possibly headed for another downturn, Asia will have to rely on its domestic economies for growth.

In China, the world’s second-biggest economy, a combination of tight monetary policy and slowing exports saw the economy slowing down its pace of growth since the start of 2011.

“Fourth-quarter 2011 GDP to be released this week is projected to grow 9.0% year on year, concluding growth for 2011 at 9.3%. Growth momentum has been clearly decelerating in [the fourth quarter of 2011] as evidenced by dwindling external demand and slower fixed asset investment growth,” the Singapore-based DBS Bank Research said.

The weakness of external trade is likely to continue into the first quarter of 2012, it said.

“Contribution of trade to growth will be much less than last year. This situation naturally calls for stronger domestic demand,” it said.

For this year, DBS Bank Research said it is “optimistic that China can achieve 8.5% growth”.

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

By: Pearl Bantillo
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