Asia petrochemical shares fall on demand concerns: eyes on China

12 July 2012 10:30  [Source: ICIS news]

By Pearl Bantillo

SINGAPORE (ICIS)--Shares of petrochemical companies in Asia slumped at the close of trade on Thursday, in line with sharp falls in crude prices on concerns about weakening demand, with central banks in the region taking steps to boost domestic consumption.

All eyes are fixed on ChinaAsia’s biggest economy and the second largest energy consumer in the world – which is due to release its second-quarter economic results on Friday, for indications on global demand.

Among Japan’s petrochemical majors, Mitsubishi Chemical closed 2.54% lower, Mitsui Chemicals shed 4.10% and Asahi Kasei slipped 2.94% as the benchmark Nikkei 225 index declined 130.99 points or 1.48% at 8,720.01.

In South Korea, LG Chem slumped 3.45%, Hanwha Chemical fell 2.30% and Honam Petrochemical settled 2.05% lower as the KOSPI composite index declined 41 points or 2.24% to close at 1,785.39.

In Hong Kong, shares of Chinese energy and petrochemical major PetroChina shares dipped 2.22% as the Hang Seng index was down 394.76 points or 2.03% to close at 19,025.11.

At 17:10 Singapore time (09:10 GMT), US crude was trading at $84.87/bbl, down 94 cents from Wednesday’s close, while Brent crude was down $1.06/bbl at $99.17/bbl.

Monetary authorities of different countries in Asia have been acknowledging the downside risks and challenges to economic growth posed by the prolonged eurozone debt crisis, as well as by the continued weakness in the US economy.

The Bank of Korea slashed its policy rates by 25 basis points to 3.0%, about a week after the People’s Bank of China delivered its second policy rate cut.

Export ties make Asian economies vulnerable to the financial and economic troubles of their major markets in the West.

DBS Bank Research is expecting China’s second-quarter GDP to have expanded 7.9% year on year – a deceleration from an 8.1% growth recorded in the first three months of 2012.

China is the biggest petrochemical importer in Asia but most of its end-products are for exports.

“Growth momentum has been clearly decelerating in 2Q12 [second quarter 2012] as evidenced by dampening external demand and slower fixed asset investment growth. External trade weakness persisted in the second quarter,” it said.

DBS Bank said that China’s private consumption “remains the only bright spot”, citing that it is traditionally more resilient than exports.

Japan’s central bank kept its policy rates at 0-0.1% on Thursday but increased the volume of its asset-purchase program by yen (Y) 5,000bn ($63bn) as an indirect means of easing monetary policy.

Its assets purchases are expected to hit Y40,000bn in end-2012 and grow to Y45,000bn in the first half of 2013.

“In global financial markets, some nervousness continues to be seen, mainly due to concern about the European debt problem. Particular attention should therefore be given to developments in these markets for the time being,” the Bank of Japan said in a statement.

The Bank of Japan has slightly lowered its GDP growth forecast for the economy to 2.2% this year from a 2.3% forecast in April, while maintaining its 1.7% real GDP growth projection for 2013.

($1 = Y79.67)

By: Pearl Bantillo
+65 6780 4359

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