Asia petrochemical shares fall on demand concerns

24 September 2012 06:53  [Source: ICIS news]

By Pearl Bantillo

SINGAPORE (ICIS)--Shares of Asian petrochemical firms tumbled on Monday, in line with regional stock markets, on lingering concerns over softening demand given underlying weakness in the global economy that prompted recent policy actions in the US and Japan.

Among Japanese major petrochemical companies, Mitsui Chemical was down 1.19%, Asahi Kasei fell 0.71%, JX Holdings dipped 0.45% at 13:09 Singapore time (06:09 GMT), while the benchmark Nikkei 225 index was down 47.01 points or 0.52% at 9,062.99.

In South Korea, LG Chem slipped 1.50%, Hanwha Chemical fell 2.89%, SK Innovation declined 1.78% as the KOSPI composite index.

In Hong Kong, Sinopec and PetrChina, while the Hang Seng index dropped 25.30 points or 0.12%.

In Malaysia, PETRONAS Chemicals was down 1.99%m while in Thailand, PTT Global Chemicals was down 0.78%.

Last week, the US Federal Reserve announced a third round of its quantitative easing measure (QE3), while Japan unexpectedly augmented its central bank’s asset purchase programme to rev up their respective economies amid the eurozone debt crisis.

Asia is being affected by the financial and economic troubles in the West because of strong export ties, which have an overall bearing on this region’s overall production, as illustrated in China’s case.

Export is a main engine of economic growth for Asia.

HSBC’s flash purchasing managers' index (PMI) for China – Asia’s biggest and the world’s second largest economy – stood at 47.8, indicating continued decline in manufacturing output. In August, China’s official PMI reading was 49.2.

A PMI reading below 50 indicates contraction.

Taiwan and South Korea - which rely heavily on China’s demand for petrochemical raw material - are scheduled to release their August industrial production data within a week.

For Taiwan, “export demand from China rose by 3.1% in August, orders from Europe fell sharply by 7.5%”, DBS Bank Research said in a note.

“The overall external environment remains fragile, posing challenges to the export-dependent economies like Taiwan,” it added.

For South Korea, on the other hand, DBS Bank is projecting a 0.09% month-on-month increase in industrial production, from 1.6% contraction in July.

“Despite the tentative signs of stabilization, there is no evidence yet to show that a meaningful recovery in [South Korea] exports and industrial activity is underway,” the note added.

For the rest of the year, “we expect a moderate rebound in consumption in the 2H2012 [second half of 2012],” it said.

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

By: Pearl Bantillo
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