Shares of major Asia petchems fall after tepid manufacturing data

SINGAPORE (ICIS)–Shares of major petrochemical firms in Asia were mostly lower on Wednesday on tepid May manufacturing data across the region.

In Japan, Asahi Kasei Corp fell 0.93% and Mitsui Chemicals was down 1.44%, while the benchmark Nikkei 225 index slipped by 0.80% at 17,096.57, as at 12:02 Singapore time (04:02 GMT).

In South Korea South Korea’s Lotte Chemical Corp was down 1.94% while SK Innovation fell 1.83%, but the KOSPI Index was up by 0.07% at 1,984.81.

In China, petrochemical shares were mixed, with PetroChina down by 0.27% and Sinopec Shanghai Petrochemical surging by 1.79% in Shanghai. The Shanghai Composite Index was up by 0.07% at 1,984.73.

In Taiwan, Formosa Petrochemical Corp was down by 0.90%.

China’s official purchasing managers’ index (PMI) for May was unchanged at 50.1 from the previous month, barely above the expansion threshold of 50 points.

Chinese media group Caixin has a weaker May reading for the country’s general manufacturing PMI at 49.2, down from 49.4 in April due to weaker demand and lower new export orders.

 “Overall, China’s economy has not been able to sustain the recovery it had in the first quarter and is in the process of bottoming out,” said Zhengsheng Zhong, macroeconomic analysis director at institutional investment research firm CEBM Group.

“The government still needs to make full use of proactive fiscal policy measures accompanied by a prudent monetary policy to prevent the economy from slowing further,” Zhong said.

China is the world’s second-biggest economy and is a major petrochemical import market in Asia.

Meanwhile, South Korea reported that its exports to China shrank for the 11th straight month in May, with a 9.1% year-on-year decline.

China is South Korea’s largest export market, taking in about a quarter of shipments, followed by the US and the EU.

Preliminary data from the Ministry of Trade, Industry and Energy of South Korea showed that overall exports fell by 6.0% year on year to $39.8bn in May, with imports down by 9.3%.

Based on the survey of Japanese media group Nikkei and financial services provider Markit, South Korea’s manufacturing PMI rose to 50.1 in May from 50.0 in April, aided by improved domestic and international demand.

For Japan, meanwhile, the Nikkei manufacturing PMI fell to a 40-month low of 47.7 in May from 48.2 in April, as new orders declined following the Kumamoto earthquakes in April.

“The Kumamoto earthquake that occurred in April should have disrupted manufacturing activities, not only in the disaster area but also across the country due to the supply chain effects,” said Singapore-based DBS Group Research in a note released on Wednesday.

“There is a rising chance that Japan will resort to fiscal policy and announce a postponement of the consumption tax hike, between now and the July election,” it said.

Elsewhere in the region, Taiwan’s manufacturing PMIs deteriorated in May, while those of Indonesia and Malaysia showed a slight improvement in numbers, based on readings by Nikkei and Markit. (Please see table below)

“The manufacturing sector in Malaysia showed no signs of improving mid-way through the second quarter of 2016,” Markit economist Amy Brownbill said.

“Data also suggested that the drop in total new orders was driven by the domestic market, as international demand rose slightly,” she said.

May PMI readings

*Based on Nikkei/Markit PMI readings

Top image: Chemical factory in Tianjin, China (Source: VIEW CHINA PHOTO/REX/Shutterstock)