Asia petchem shares ease off highs on IMF warning of deeper global recession

SINGAPORE (ICIS)–Asian petrochemical shares were mostly higher on Wednesday but eased off from recent highs after the International Monetary Fund (IMF) projected that the global economy is set to contract by 3% this year, while oil prices were higher on bargain hunting.

At 02:21 GMT, Japan’s Mitsui Chemicals rose by 0.36%, Taiwan’s Nan Ya Plastics was up by 0.50% and Hong Kong-listed Sinopec Shanghai Petrochemical was 0.49% higher.

Japan’s Nikkei 225 Index was down by 0.46%, Hong Kong’s Hang Seng Index was up by 0.37% and Singapore’s Straits Times Index was up by 0.23%.

South Korea’s markets are closed today for their parliamentary elections.

Global financial markets are now bracing for Wednesday’s release of March US retail sales, a major indicator showing how the virus pandemic has affected the US economy.

Overnight, US markets rose on signs that the coronavirus pandemic is easing, even as the first batch of quarterly earnings showed the outbreak is taking a toll on corporate earnings.

The Dow gained 2.39%, the S&P 500 rose by 3.06% and the Nasdaq Composite closed 3.95% higher.

In Europe, chemicals stocks and main bourses traded slightly higher on Tuesday as the region returned from the Easter break, with some countries allowing small businesses to reopen.

Company/Stock Exchange	% Change
Nikkei 225 (Japan)	-0.46%
Asahi Kasei Corporation	-1.09%
JXTG Holdings, Inc.	-2.10%
Mitsubishi Chemical Holdings Corporation	0.64%
Mitsui Chemicals, Inc.	0.36%
Hang Seng Index (Hong Kong)	0.37%
Sinopec Shanghai Petrochemical Company Limited	0.49%
PetroChina Company Limited	-1.03%
TSEC weighted index (Taiwan)	1.03%
Formosa Petrochemical Corporation	0.00%
Nan Ya Plastics Corporation	0.50%
Formosa Chemicals & Fibre Corporation	0.42%
STI Index (Singapore)	0.23%
Wilmar International Limited	-0.28%
Olam International Limited	0.70%
FTSE Bursa Malaysia KLCI (Malaysia)	0.86%
SSE Composite Index (Shanghai, China)	-0.08%
Jakarta Composite Index (Indonesia)	0.48%
PT. Chandra Asri Petrochemical Tbk	-0.66%

The US-based IMF on Tuesday warned that the global economy will likely suffer the worst financial crisis in 2020 since the Great Depression, as governments worldwide grapple with the coronavirus pandemic.

The IMF now expects the global economy to contract by 3% in 2020, reversing its forecast in January for an expansion of 3.3% this year.

The latest IMF World Economic Outlook report projects China and India to avoid a contraction in 2020 but growth this year is expected to plunge to 1.2% and 1.9% respectively before mounting a robust recovery next year.

US President Donald Trump on Tuesday said that he believes some states will be able to lift the strict social distancing measures that have strained their economies before the end of April.

The UK economy could shrink by 13% this year due to its lockdown, according to the Office for Budget Responsibility. The UK’s economy could contract by 35% in the second quarter, with unemployment hitting 10%, it said.

The IMF has tipped a 6.5% recession for the UK economy before recovering to 4.0% in 2021.

The People’s Bank of China (PBOC) on Wednesday slashed the key rate for its medium-term lending tool for financial institutions to a record low to boost the economy.

The PBoC lowered the one-year medium-term lending facility (MLF) to 2.95%, the lowest level since the liquidity tool was rolled out in September 2014, down from 3.15% previously.

$/bbl (03:05 GMT)	Last price	% change	Net change	Closing	High	Low
Brent	29.97	1.25%	0.37	29.6	30.33	29.66
US WTI	20.57	2.29%	0.46	20.11	20.89	20.24

Oil prices rebounded on Wednesday on bargain hunting after the slump seen in the previous session.

Crude futures tumbled more than 10% on Tuesday amid doubts that the record supply cuts by OPEC and its allies could soon balance markets wrecked by the coronavirus pandemic, though a predicted plunge in US shale production lent some support.

“The supply cut of 9.7m bbl/day is insufficient compared to the estimated global demand slack of 20-35m bbl/day, and while it may provide a firmer floor beneath prices, it is unlikely to fuel a rally in oil prices,” Singapore’s OCBC Bank said in a note.

Focus article by Nurluqman Suratman

Photo by Justin Lane/EPA-EFE/Shutterstock

With additional reporting by Al Greenwood and Jonathan Lopez

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